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Comparative advantage

 
 
Reply Wed 7 Dec, 2016 02:43 pm
4 persons A,B,C and D. Each of them has its own utility function and the production in 1 hour
A---> u(c,o) = CO | 40 kg of coffee or 10 litres of oil
B---> u(c,o) = 2C + O | 20 kg of coffee or 60 litres of oil
C ---> u(c,o) = CO | 20 kg of coffee or 60 litres of oil
D--> u(c,o) = 2C + O | 40 kg of coffee or 10 litres of oil


Each of them works for 8 hours. The price of oil is 1. Find the equlibrium price of coffee, production and consumption choices for each type.
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