William Gregg owned a mill in South Carolina. In December 1862, he placed a notice in the Edgehill Advertiser announcing his willingness to exchange cloth for food and other items. Here is an extract:

1 yard of cloth for 1 pound of bacon

2 yards of cloth for 1 pound of butter

4 yards of cloth for 1 pound of wool

8 yards of cloth for 1 bushel of salt

Calculate the relative price of 1poundofbacon in terms of poundsofbutter.

If the price of bacon is $0.20 a pound, what do you predict is the money price of a poundofbutter?

>>> Answer to 2 decimal places.

If the price of

bacon

is

$0.20

a pound, you would predict that the price of a

poundofbutter

is

$enter your response here.

Part 3

If the money price of bacon was

20

a pound and the money price of salt was $2.00 a bushel, people _____ buy bacon and trade it for cloth because _______.

A.

would not; the relative price of 1 bushel of salt is only 1/8 yard of cloth

B.

would not; they would have to buy 8 yards of cloth for $1.60 and then give Mr. Gregg an extra $0.40 to buy a bushel of salt

C.

would; they could trade the cloth for salt, which is even more important for life than either bacon or cloth

D.

would; they could buy 8 yards of cloth for only $1.60, and use that cloth to obtain a bushel of salt