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Consider a simple economy with two goods food and clothing and two consumers A and B. For a given initial endowment when the ratio of food to clothing prices in an economy is 3/1 A wants to buy

Consider a simple economy with two goods, food and clothing, and two consumers, A and B. For a given initial endowment, when the ratio of food to clothing prices in an economy is 3/1, A wants to buy 6 units of clothing while B wants to sell 2 units of food. Is PF / PC = 3 an equilibrium price ratio? If so, explain why. If not, state in which direction it will tend to change.

May 18 2020 View more View Less

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