Scenario 2: Trader 1 is endowed with 100 identical Left shoes. Trader 2 is endowed with 99 identical Right shoes. Each trader's utility equals the number of complete pairs of shoes in her allocation. Traders trade in competitive markets and reach a competitive equilibrium. Shoes are infinitely divisible.
An equilibrium allocation of shoes gives trader 2:
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General equilibrium and exchange economies has come up 69 times in 7 exams since 2004.
This question is on Walras' law, numeraire and relative prices, part of General equilibrium and exchange economies in Microeconomics.
Why one market clears automatically when the others do, and why only relative prices matter.
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Question from the DSE 2019 paper. Solutions are TestStop's own. Not affiliated with or endorsed by any examination authority.