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?

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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