The Edgeworth Box is a diagram illustrating the distribution of two goods between two consumers, helping us visualize all possible allocations of goods and identify points where consumers can be better off through trade.
It’s commonly useful in information theory and economics, or any calculation and field involving utility, good consumption, and good exchange.
Visually, the Edgeworth box is basically two graphs, one for each consumer, one of which is flipped and stacked on top of the other.
More specifically:
The origin point for consumer A is in the bottom-left, while the origin point for consumer B is the top right. The width represents the total quantity available of Good X, while the height represents the total quantity available of Good Y.
That’s the most basic form of the box. Our next addition, and the most critical component of the Edgeworth box, is that of indifference curves.
Indifference curves, as you’ve likely learned, are combinations of goods that give consumers the same level of utility. There are theoretically infinite…
