Consider an economy that produces and consumes only wheat and milk (in perfectly competitive markets). The production possibility frontier for this economy is shown on the following graph (labeled PPF), along with the indifference curve reflecting the preferences of people in this economy (UL). Initially, the ratio of the prices of the two goods is given by the black budget line (plus symbols). Hint: Hover your cursor over the budget line to see the slope. ? PPF WHEAT U A+ Budget MILK You can see that at the current prices, a gallon of milk is expensive as a bushel of wheat, and consumers demand the quantities of milk and wheat given by point while producers choose to produce the quantities given by point . In order to reach a general equilibrium, the price of wheat must relative to the price of milk.