08 Jun Question 1. Consider two individua
Question
1. Consider two individuals, Fred and Barney. In one hour, Fred can produce either 15 gallons of beer, or 3 gallons of wine. In one hour, Barney can produce 2 gallons of beer or 4 gallons of wine. Assume both goods can be produced in continuous quantities.
c) Assume that each person wants to consume 2 gallons of wine, then as much beer as they can. Determine what each person will end up consuming
i) when they cannot trade.
ii) when they can trade at a price of 1gallon beer = 1 gallon wine.
Use this to explain why trade benefits both consumers.
Please explain how trade works by breaking it down so I can understand the concept well!
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