Solving For A CIC
A community indifference curve (CIC) provides the set of all aggregate endowments (x-bar, y-bar) = (x1 + x2, y1, + y2) needed to achieve a given distribution of utilities, (u1-bar, u2-bar). The community indifference curve can be found by solving for the following minimization problem:
Min y-bar s.t. U1(x1, y1,) ≥ u1-bar and U2(x-bar – x1,y-bar – y1) ≥ u2-bar
CICs assume allocative efficiency amongst members of the community. Allocative Efficiency provides that MRS1xy = MRS2 xy. The CIC comes from solving for y-bar in terms of x-bar, y-cic(x-bar).
Community indifference curves are an aggregate of individual indifference curves.
Read more about this topic: Community Indifference Curve
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