ScholarMatic: Explanation & Answer
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- Anna’s demand for peaches is given by PA = 200 – 3QA, where QA is the quantity (kilograms) demanded at price PA ($/kilo). Basil’s demand is given by PB = 120 – 2QA, where QB is the quantity (kilograms) demanded at price PB ($/kilo). Each of the two has $2,000 that they can spend if they want to buy something. a. Suppose the endowments are as follows: Anna has 110 kilograms of peaches, Basil has none. When they trade, who will sell to whom? How many kilos will be sold? At what price?
- b. Suppose the endowments are as follows: Anna has no peaches, Basil has 110 kilos. When they trade, who will sell to whom? How many kilos will be sold? At what price?
- c. Suppose the endowments are as follows: Anna has 60 kilograms of peaches, Basil has 50 kilos. When they trade, who will sell to whom? How many kilos will be sold? At what price?
- d. Summarize, in your own words, the answers to parts a) through c)
ScholarMatic: Explanation & Answer
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