Suppose Tom, Dick, and Harry Live in a Barter Economy

Essay

Suppose Tom, Dick, and Harry live in a barter economy.Tom produces wine, Dick bakes bread, and Harry makes cheese.Tom wants some bread to go with his wine and is willing to trade 1 litre of wine for two loaves of bread.Dick wants some cheese to go with his bread and is willing to trade one loaf of bread for one-half kilogram of cheese.Harry doesn't want bread, but wants some wine to go with his cheese and is willing to trade cheese for one litre of wine.It is not possible for all three of them to meet together at one time.(a) Explain how this situation illustrates the difficulty with a barter economy.(b) Devise a money system using rubies where four rubies are equivalent in value to one litre of wine.In other words tell how much bread and cheese would be worth in terms of rubies in this economy.In this system, how much cheese must Harry sell in order to buy one litre of wine?