Question

I realize this is a challenging question that requires manipulation of numbers in a creative sense. As a result, I want you to attempt it. This problem is an exercise that covers a barter economy in a 3 product environment. There are four goods produced in an economy by four individuals: Good Producer Pears Orchard Owner Bread Baker Shoes Cobbler 90 Pears = 1 Pair of Shoes 15 Pears = 1 Loaf of Bread

What is the exchange rate between shoes and bread (how many loaves of bread are needed to purchase pair of shoes? (6 Points)

What would happen to the exchange rate between pears and shoes if there was a very good harvest in pears? This does not require a mathematical answer—simply explain the outcome (for example, inflation, deflation, disinflation, stagnation…). Note that you do not have to use all of these examples.

Answer 1

90 pears = 1 pair of shoes

1 pear = 1/90 pair of shoes a =====>1

15 pears = 1loaf of brea

putting value from. 1

15/90pair of shoes = 1 loaf of bread

1/6 pair of shoes = 1 loaf of bread

1 pair of shoes = 6 loaf of bread .

if there is good harvest of pears , so supply of pears in the market will increase. this will cause the value of pear to fall.

so. there will be deflation

e.g.: now 1 pear = 1/90 pair of shoes = 0.011

if harvest good then 1 pear = 1/120 pair of shoes = 0.008