Question
Two individuals, A and B, are free to engage in trade of clothing and food. Initially, A has 12 units of clothing and 9 units
Two individuals, A and B, are free to engage in trade of clothing and food. Initially, A has 12 units of clothing and 9 units of food, and B has 8 units of clothing and 11 units of food. The individuals have the following utility functions in clothing C and food F:
UA = 0.15QC QF
UB = 0.08QC QF
where QF represents units of food, QC represents units of clothing, and U represents utility. Determine if a mutually beneficial trade is possible between A and B. If so, who would trade for what? [7 Marks]
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The Worldly Philosophers The Lives, Times And Ideas Of The Great Economic Thinkers
Authors: Robert L Heilbroner
7th Edition
068486214X, 9780684862149
