| Consider X was Strawberry and Y was Apple in the graph to the right. Imagine that, in order to move from the original position to the final one, H had to give up 2 strawberries (x') in return for 1 apple (y'). The price ratio of strawberries to apples in this economy is then 1/2 = Px/Py, and therefore Py = 2Px. Thus, if strawberries (X) were worth $1 each, apples (Y) would be worth $2. |
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