Question

"Suppose an economy has only two​ sectors: Goods and Services. Each​ year, Goods sells 80​% of its outputs to Services and keeps the​ rest, while Services sells 72​% of its output to Goods and retains the rest. Find equilibrium prices for the annual outputs of the Goods and Services sectors that make each​ sector's income match its expenditures."

Answer 1

price of goods is 0.9 times of the price of services

Step-by-step explanation:

Data

Goods sell = 80%

Services sell = 72%

Equilibrium prices = ???

Solution

In order to find equilibrium prices we need to develop an equation for that

Let's denote

Goods = x

Services = y

Goods sold = 80% of x = 0.8x

Services sold = 72% o y = 0.72y

Equation: 0.8x = 0.72y

Let's solve the equation furthermore

x =
`(0.72)/(0.8)`y

x = 0.9y

Hence the price of goods is 0.9 times of the price of services