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?
What will be an ideal response?
The general formula for the number of prices is n (n-1)/2; where n = the number of goods. Since we have 100 people each producing one good, we have 100 goods, so n = 100. Plugging this into our formula, we obtain: 100(99)/2 = 4,950; so there will be 4,950 relative prices.
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