Consider a competitive economy consisting of many farmers and many tailors. The number of farmers is equal to the number of tailors. Farmers are identical. Each farmer has 10 units of food (F) but no clothing (C). Tailors are also identical. Each tailor has 20 units of clothing but no food. Suppose each person has the utility function U = FC . The price of clothing is always £1. What is the equilibrium price for food? Explain your answer.

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Equilibrium Price Analysis Budget Constraint In equilibrium each farmers budget constraint must be s... View the full answer