Question

7. On the consumer side, why are prices advantageous over a system of distributed baskets where people can trade amongst themselves? After all, people in the priceless trading system can end up with baskets that make them happier than what they received. So what advantage do prices confer for consumers? (Hint: Pareto efficient should be included in this answer.) 8. On the producer side, why are prices advantageous over a system where each producer would make some amount of goods along their PPF? (Hint: The word incentives should be included in this answer. Explain what information the producers would have to glean from others before making their production decision in a priceless system of trade.)

Answer 1

& all me problem (7) When consumers solve their consumer proble people face the same prices, the chosen bo are necessconly Pareto efficent . Nobody can be made me better off without hurting someone else. In the price less trade system, this process of arriving at at Pareto efficiency iency would & difficult. be very time-consuming