題組內容

3. Consider a society consisting of just a farmer and a tailor. The farmer has 10 units of food and 10 units of clothing. The tailor has 10 units of food and 30 units of clothing. Suppose each has the utility function $U = \sqrt{FC}$. The price of clothing is always $2.

ii. If the price of food is $3, does a competitive equilibrium exist? If yes, explain why. If not, what will happen to the price of food? (8%)