Question
Suppose that there are two individuals (X and Y) and two goods (Food and Clothes) in an economy (Food is in horizatal axes). The initial
Suppose that there are two individuals (X and Y) and two goods (Food and Clothes) in an economy (Food is in horizatal axes). The initial endowment of X is 50 units of Food and 70 units of of Clothes and initial endowment of Y is 60 units of Food and 40 units of Clothes. Price of Food is $ 6 and price of Clothes is $2 . A) What is the price ratio (slope of price line)? B) What much should individuals trade for one good another to assure competitive equilibrium? C) Specify them as ratio of Clothes/Food. D) If X wants to sell14 units of Food and Y wants to sell42 units of Clothes, would a competitive equilibrium be formed? Why?
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