Candice can make 5 units of food per day if she devotes all of her time to food production. She can make 10 units of clothing if she spends the whole day at clothing production. If she divides his time between the 2 activities, her output of each good will be proportional to the time spent on each. The corresponding figures for Friday are 10 units of food and 15 unite of clothing. Describe the production possibilities frontier for their economy. If Candice and Friday both regard food and clothing as perfect substitutes, what should each produce?
Now suppose a trading ship visits the island each day and offers to buy or sell food and clothing at price ratio Pf/Pc =4. How if at all, will the presence of this ship alter the production and consumption decisions of Candice and Friday?