Will people, on average, tend to eat more grapefruit in Florida or in Illinois? In which state will the people, on average, tend to eat better quality grapefruit? Explain, using the concept of relative price.
What will be an ideal response?
Grapefruit are grown in Florida but not in Illinois, so transportation costs will make the price of grapefruit (relative to other foods such as corn) lower in Florida than in Illinois. Thus people in Florida will tend to eat more grapefruit than people in Illinois. However, the transportation costs will also lower the price of high-quality grapefruit relative to low-quality grapefruit. Thus the people in Illinois will on average be eating better quality grapefruit than will the people in Florida.
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