Assume the first agent is endowed with 2 apples and 3 bananas. If the relative price of
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Question:
Assume the first agent is endowed with 2 apples and 3 bananas. If the relative price of apples in terms of bananas Pa / Pb to be equal to 1, the consumption bundle will be (2A, 3B) in absence of trade. What does the consumption bundle in absence of trade look like if the relative price of apples in terms of bananas Pa / Pb is 0.5?
Please also draw the budget constraint line and point out the orginal endowment and slop?
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