Asked by
serge katchekpele
on Dec 01, 2024
Verified
In a pure exchange economy with two persons and two goods, one person always prefers more to less of both goods and one person likes one of the goods and hates the other so much that she would have to be paid to consume it.Both are initially endowed with positive amounts of both goods.The competitive equilibrium price of the good that one person hates
A) must be negative.
B) must be smaller than the price of the good both people like.
C) must be less than 1.
D) could be positive or negative, depending on details of tastes and technology.
E) must be positive.
Pure Exchange Economy
An economic model where agents trade existing goods with no production, focusing solely on the allocation of resources and goods among market participants.
Competitive Equilibrium Price
The market price at which the quantity of an item supplied is equal to the quantity demanded, within a competitive marketplace.
Endowed
Provided with a quality, ability, or asset; in economics, it often refers to the resources or goods that an individual or institution possesses.
- Comprehend the relationship between marginal utilities and price ratios in market equilibrium.
Verified Answer
AC
Learning Objectives
- Comprehend the relationship between marginal utilities and price ratios in market equilibrium.