Assume a barter economy that consists of only three standardized goods, (X, Y, Z). The relative prices of those goods are provided in the relative price matrix below. Good X Y Z X Y N 1 1/2 1/3 2 1 2/3 3 1.5 1 a. What is the minimum number of relative prices we should know to describe the pricing of goods in this economy? b. Suppose that the society reached an agreement on the silver to be used as money. Assume that ten silver coins can buy only one Good Z. Find the prices of Good Y and Good X and list all prices in terms of money. c. What are the similarities and differences between the matrix of relative prices and the list of prices in (e)? d. Discuss the role of money as a common denominator. Which function(s) of the money represents this role?

Assume a barter economy that consists of only three standardized goods, (X, Y, Z). The relative prices of those goods are provided in the relative price matrix below. Good X Y Z X Y N 1 1/2 1/3 2 1 2/3 3 1.5 1 a. What is the minimum number of relative prices we should know to describe the pricing of goods in this economy? b. Suppose that the society reached an agreement on the silver to be used as money. Assume that ten silver coins can buy only one Good Z. Find the prices of Good Y and Good X and list all prices in terms of money. c. What are the similarities and differences between the matrix of relative prices and the list of prices in (e)? d. Discuss the role of money as a common denominator. Which function(s) of the money represents this role?

Microeconomic Theory

12th Edition

ISBN:9781337517942

Author:NICHOLSON

Publisher:NICHOLSON

Chapter6: Demand Relationships Among Goods

Section: Chapter Questions

Problem 6.5P

See similar textbooks

Similar questions

Can you please make sure that it is clear in which each line is shifting No handwritting solution
For a two-person two goods exchange economy, provide a formal definition of a barter equilibrium and formally demonstrate that such allocations are in the core of the economy.
An alternative way of thinking about the forces that cause markets to equlibrate in the real world is to think of markets reallocating the good from low to high valued use. Or to think of how the action of buyers and sellers engaging in mutually beneficial voluntary exchange (market forces) reallocates legal ownership or the physical location of the good from low to high valued used. When a unit of a good is sold, that means the value the seller places on the good is lower than the value the buyer places on the good. After the sale has taken place, the ownership of the good has been transferred from a person who has a low value to a person with a high value. This is called a reallocation from low to high valued use. Sometimes this reallocation involves a physical movement of the good rather than a transfer of legal ownership. The good is transported from an area where the price of the good is low to an area where the price of the good is higher. This is also called a reallocation from…
An alternative way of thinking about the forces that cause markets to equlibrate in the real world is to think of markets reallocating the good from low to high valued use. Or to think of how the action of buyers and sellers engaging in mutually beneficial voluntary exchange (market forces) reallocates legal ownership or the physical location of the good from low to high valued used. When a unit of a good is sold, that means the value the seller places on the good is lower than the value the buyer places on the good. After the sale has taken place, the ownership of the good has been transferred from a person who has a low value to a person with a high value. This is called a reallocation from low to high valued use. Sometimes this reallocation involves a physical movement of the good rather than a transfer of legal ownership. The good is transported from an area where the price of the good is low to an area where the price of the good is higher. This is also called a reallocation from…
What problem does barter entail? Indicate the economic significance of money as a medium of exchange. What is meant by the statement “We want money only to part with it”?
Recognize the situation when both the parties in a barter economy have to agree to sell and buy each other's commodities ? What is it called ?
Consider a simple economy consisting of two countries, England and France. England has 25 workers and France has 75 workers. England can produce 4 units of grain and 2 units of cloth with each unit of labor. France can produce 1 unit of grain and 1 unit of cloth with each unit of labor. Wages per unit of labor are the same in both countries. c. Assume that consumers have utility ?=?????^(1/2) ⋅????ℎ^(1/2). How much does each country produce and consume of each good in autarky? Show the consumption graphically by drawing the indifference curves into your two diagrams. d. Now allow for trade. How much does each country produce and consume of each good in this case? Draw the new production possibilities frontier, indifference curves, and equilibrium point into your two diagrams, and indicate exports and imports. e. What is the utility of consumers in each country under free trade? How much does utility change relative to autarky?
Please explain how Jack and Cody can maxmise utility through living in the same household with a unitary and non-unitary models. Unitary models - Mutual altruism (or any unitary model) Non-unitary models - Copertive models - Collective + Bargaining model.(or any Non-unitary models)
The high transaction costs associated with a barter system refers to: Answer a. The fact that, often times, these exchanges are taxed by governments b. The risk associated with having to carry an inventory of goods to trade c. The high cost associated with finding someone with whom to exchange d. The cost of drawing up complete contracts
4 In the case of a median exchange, chips can be used by both the buyer and the seller, with the seller canceling beverages and food in return for chips within the casino in the case of a unit of account. Other goods are quantifiable. In the case of a store of value, a common denominator is established, and money is utilized to purchase goods and services in the future. As a result, chips were employed in a variety of cuisines and beverages.
Consider the following example of bartering: 1 10-ounce T-bone steak can be traded for 5 soft drinks. 1 soft drink can be traded for 10 apples. 100 apples can be traded for a T-shirt. 5 T-shirts can be exchanged for 1 textbook. It takes 4 textbooks to get 1 VCR. How many 10-ounce T-bone steaks could you exchange for 1 textbook? How many soft drinks? How many apples? State the price of T-shirts in terms of apples, textbooks, and soft drinks. Why do you think we use money as a unit of account?
Which of the following is an example of barter? Multiple Choice O O Ahmed donates to a charity knowing that he will receive tax benefits from doing so. Kwame leaves a large tip for his walter. Nora purchases lunch with cash. Hena takes out her neighbor's trash, and the neighbor gives Hena some chocolate as repayment.