Explain how trade works by breaking it down

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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

Reference no: EM13836685

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