Which is the correct answer ? Suppose there are 10 apples and 10 oranges in the economy. Joe is currently consuming 4 apples and 5 oranges, and Jane is consuming 6 apples and 5 oranges. At this allocation, Joe's marginal utility of apples is 3, and his marginal utility of oranges is 5. Jane's marginal utility of apples is 6, and her marginal utility of oranges is 10. The current price of apples is R4 per unit and the current price of oranges is R5 per unit. To reach a competitive equilibrium, the required price adjustment is: A. A decrease in the orange price relative to the apple price. B. A decrease in the apple price relative to the orange price. C. No change in the relative prices. D. An increase in both prices.

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Equilibrium Price and Quantity

Equilibrium refers to a state of balance that comes about because there is equality in all forces.