Suppose There Is an Economy That Has 100 People Each

question 20

Essay

Suppose there is an economy that has 100 people each of whom makes a different good, and that they use a barter system for exchange. How many relative prices will there be?

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Definitions:

Ordinary Demand Curve

A graphical representation showing the relationship between the price of a good and the quantity demanded, with all other factors being held constant.

Price Elasticity

A measure of how much the quantity demanded of a good responds to a change in the price of that good, reflecting consumers' sensitivity to price changes.

Utility Function

A mathematical representation of a consumer's preference ranking over a set of goods and services.

Substitution Effect

Variations in consumer purchasing patterns as a result of shifting prices among products, which leads to the exchange of one good for another.