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Chapter 3: Q. 3.2 (page 49)

Discuss the difference between money prices and relative prices

Short Answer

Expert verified

Money prices are absolute while relative prices are in comparison to another.

Step by step solution

01

Step1. Introduction

There exists conceptually two prices in economics: money prices and relative prices.

02

Step2. Explanation

Money price refers to the exact price of a commodity based on the cost incurred for its production. It is hence an absolute price of a commodity. Eg. price of an apple is Rs 10.

Relative price on the other hand is measured in comparison to another commodity. It is used to make comparisons between different goods.

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Most popular questions from this chapter

In Fig 3-2, the current position of the demand curve is D1, and the price of a portable power bank is $3. If there is an increase in the price of tablet devices that are complements to portable power banks, will the demand curve shift to D2 or to D3? What is the change in the amount of portable power banks demanded?

Why do you suppose that prices of barbecued brisket have been rising in

many U.S. cities?

What do you predict has happened to oil storage prices

whenever shortages of storage space have arisen?

In the market for portable power banks(a normal good), explain whether the following events would cause an increase or a decrease in demand or an increase or decrease in the quantity demanded. Also, explain what happens to the equilibrium quantity and the market-clearing price.

a. There is an increase in the price of carry cases for portable power banks.

b. There is a decrease in the price of devices used to charge portable power banks.

c. There is an increase in the number of consumers of portable power banks.

d. A booming economy increases the income of the typical buyer of portable power banks.

e. Consumers of portable power banks anticipate that the price of this good will decline in the future.

Give an example of a complement and substitute in consumption for each of the following items.

a.Bacon

b.Tennis racquets

c.Coffee

d.Automobiles
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