You Live in a World Where the Marginal Rate of Substitution

question 19

Essay

You live in a world where the marginal rate of substitution of food for clothing is two and the price ratio between food and clothing is one.Your world also has labor and capital which has marginal products respectively of two and five.The price of capital is ten and the price of labor is 8.Finally, your world can transform two units of food into one unit of clothing or vice versa.Assuming that all the conditions of general equilibrium are present, what will happen in the various sectors of the economy to bring about general equilibrium?

---

Definitions:

Richard Dawkins

A British evolutionary biologist and author, known for his work on gene-centered view of evolution and for being a prominent atheist.

Virtual Destruction

The act of causing significant damage or annihilation in a digital or simulated environment.

Western Conceptions

Ideas, beliefs, or values that originated or are predominantly held in Western societies.

Reasoning

The process of thinking about something in a logical, rational way to form a conclusion or judgment.