Posted by D on .
Why does trade of any type take place? Illustrate your answer by reference to each of the following:
Market exchange in which price is determined by Demand and supply. (refer in your answer to producer and consumer surplus)
Exchange between two individuals based on differences in tastes given a fixed endowment of two goods.
Take a shot, why would trade take place. Hint: under trade, both sides are better off.
what does fixed endowment of two goods mean ? that means i have 5 apples and someone else has 5 oranges. but we both cannot buy any additional apples or oranges? and the last option we have is to trade due to difference in taste??
i am abit confused about part 2.
Mirco economics -
Endownment in economics is the value one places on a certain object...
so in this case, i think fixed endowment just means u wud value the oranges as much as the apples