Question

In a barter economy the number of prices in an economy with N goods is

A) [N(N - 1)]/2.
B) N(N/2).
C) 2N.
D) N(N/2) - 1.

Answer 1

In a barter economy with N goods, the number of prices can be determined by considering that each good can be traded with every other good. The correct answer is A) [(N(N-1))/2].

Step-by-step explanation:

In a barter economy with N goods, the number of prices can be determined by considering that each good can be traded with every other good. For the first good, there are N-1 other goods that it can be traded with. Similarly, for the second good, there are N-2 other goods that it can be traded with, and so on. Therefore, the total number of possible trades is the sum of (N-1) + (N-2) + ... + 1, which is equal to (N(N-1))/2.

For example, if there are 3 goods (N = 3), then the number of prices is given by (3(3-1))/2 = 3.

Therefore, the correct answer is A) [(N(N-1))/2].