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^1/3^C^2/3.If the price of clothing is always $1,and the food price is currently $1,then we can conclude

Question

Quizplus · Accepted Answer

Since the market price for food is already at $1 and the utility functions are known for both the farmer and the tailor, the market is at a competitive equilibrium. There is no reason for the price of food to drop or increase towards a competitive equilibrium because it's already there.

Consider a Society Consisting of Just a Farmer and a Tailor.The