Question: Using this fair trading price in part (e), Freya suggests the following trade: 400kg of the crop she is not specialising in, in return for
Using this fair trading price in part (e), Freya suggests the following trade: 400kg of the crop she is not specialising in, in return for an amount (as per the fair trading price) of the crop she is specialising in. Should Calum accept this trade? What amount of both crops would Freya and Calum have if they do undertake this trade at the fair trading price? Has specialisation increased total output if this trade takes place? Explain your answer.
If 100% of time is spent on the production of one crop | Self sufficiency | |||
Potatoes (kg) | Oats (kg) | Potatoes (kg) | Oats (kg) | |
Freya | 1000 | 400 | 300 | 250 |
Calum | 800 | 1000 | 350 | 400 |
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