Question

Consider two barter economies: duos and varietas. duos produces two different goods, whereas varietas produces 80 different goods. both countries have the same number of people. in which barter economy is it more likely that the means of payment and the units of account would be efficient? how many relative prices are there in duos compared with varietas? which economy would benefit more from adopting money?

Answer 1

Answer:

in which barter economy is it more likely that the means of payment and the units of account would be efficient?

• In Duos since there are only two products, the relative price will be x of product A for y of product B.

how many relative prices are there in duos compared with varietas?

• In Duos there exists only 1 relative price, while there are 3,160 relative prices in Varietas.

which economy would benefit more from adopting money?

• Varietas would benefit most from adopting money since they would go from having more than three thousands different combination of prices to only one unit of account (money).