Question: Consider a two-person general equilibrium exchange economy with three goods, namely, potatoes (p), vegetables (v) and meat (m). At the current prices pp = 1,
Consider a two-person general equilibrium exchange economy with three goods, namely, potatoes (p), vegetables (v) and meat (m). At the current prices pp = 1, pv = 2 and pm=3, there is a surplus of 1 ton of potatoes and a shortage of 1/3 ton of vegetables. Then:
A. there is a also a shortage of meat.
B. there is a also a surplus of meat.
C. there is also a shortage of 2/3 tons of meat.
D. whether there is a shortage or a surplus of meat cannot be determined with the current information.
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Solution At the demand side Demand for potatoes p is Dp Demand for vegetables v i... View full answer
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