Consider the example of Greta and Carlos discussed in The Economy textbook Unit 1 Section 1.8 and Figure 1.9a and 1.9b. Assume the market price is now 1 tonne of wheat can be traded for 48 apples. Greta proposes a trade of 14 tonnes of wheat with Carlos.

a. What would Greta and Carlos have available to consume of both goods if the trade goes ahead?

b. Would both Carlos and Greta be better off after the trade? Explain.

Self-sufficiency Complete specialization and trade Production Trade Consumption 2 3 4 Greta Apples 500 0 600 Wheat 30 50 = 15 + 35 Carlos Apples 300 1,000 = 600 + 400 Wheat 14 O 15 Total Apples 800 1,000 600 1,000 Wheat 44 50 15 50 Figure 1.9b Comparing self-sufficiency and specialization. Under self-sufficiency, both