Imagine an economy made up of the people and commodities in the Table 1 below. Each column refers to the commodity listed at the top and each row to the person listed at the left. A positive entry indicates the number of units of the commodity that someone has and is willing to sell. A negative entry indicates the number of units of the commodity that the person wants to buy. Each of these entries refers either to the quantities supplied or demanded given a price of ten dollars per unit of each commodity. For example, Elizabeth has two bushels of potatoes to sell. She wants to buy two hours of child guidance services for her daughter. Table 1: A hypothetical 331 economy Potatoes Dance Lessons Child guidance Elizabeth, the potato farmer -2 Anthony, the dance instructor -2 +2 0 Hassan, the child psychologist -2 +2 Notice that all the rows and columns add up to zero. That means we have an equilibrium price system. Each person is able to trade for what is wanted and the quantities demanded and supplied are equal at the given prices. () Assume Elizabeth has twenty dollars. Construct a set of money-using trades that clears the market.. Comment on your answer. (11) Construct a set of barter or indirect barter transactions that clears the market. Hint: Remember that services such as dance lessons or child guidance cannot be passed through an intermediary. Comment on your answer. (15 marks) +2 0


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