Consider a small closed economy with two consumption goods: good 1 (meat) and good 2 (berries). There are two types of agents, h and g, and they have the same preferences over consumption, represented...

Extracted text: Consider a small closed economy with two consumption goods: good 1 (meat) and good 2 (berries). There are two types of agents, h and g, and they have the same preferences over consumption, represented by the utility function: u(x1, x2)= ln x1 + ln x2. However, there are twice as many type-h agents as type-g agents. The only factors of production are their labour. When a type-h agent chooses to spend a fraction a of his day producing meat and the rest producing berries then his output is (yf, y5) = (2a, 2(1 – a)). A type-g agent is more productive. When she chooses to spend a fraction Bof her day producing meat and the rest producing berries then her output is (yi, y) = (3ß, 12(1 – B)). - Normalise the price of one unit of berries (good 2) to 1, and let p be the price of one unit of meat (good 1). Which of the following statements is true? Equilibrium price must satisfy 1 4. O d. Equilibrium price p must be equal to 1 or must be equal to 4.