In: Economics
Consider a society consisting of just a farmer and a tailor. The farmer has 30 units of food but no clothing. The tailor has 60 units of clothing but no food. Suppose each has the utility function U=F^1/3C^2/3 . If the price of clothing is always $1, and the food price is currently $1, then we can conclude
Question 10 options:
the market is at a competitive equilibrium. |
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the price of food will drop towards a competitive equilibrium. |
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the price of food will increase towards a competitive equilibrium. |
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None of the above. |