Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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uppose two individuals (Cindy and Elicia) each have 12 hours of labor to devote to producing either roti (X) or fry rice (Y). Cindy’s demand for X and Y is given by: XC = 6/PX and YC = 6/PY, whereas Elicia’s demands are given by, XE = 8/PX and
YE = 4/PY. The individuals do not care whether they produce X or Y and the production function for each good is given by X = 3L; Y = 4L where L is the total labor devoted to production of each good. The equation for the frontier is given by X/3 + Y/4 = 24.
Which is the price ratio, Px/Py?
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