ATAR Notes: Forum

VCE Stuff => VCE Business Studies => VCE Subjects + Help => VCE Economics => Topic started by: Jxn on January 14, 2016, 03:43:20 am

Title: Relative Prices Help!!?!
Post by: Jxn on January 14, 2016, 03:43:20 am

Just needed some clarification on determining relative prices of goods.

"If at another time the price of gasoline is $2.00 per gallon and the wage rate is $10.00 per hour then the relative price of gasoline is 0.2 hours per gallon"
 
Could someone show me the work mathematically. I understand that its 2/10 but why? Wouldn't that give gallon per hours worked? Thus giving the relative price for labour rather than gasoline?

Title: Re: Relative Prices Help!!?!
Post by: abcdqdxD on January 17, 2016, 01:57:35 pm

Relative prices is just comparing the cost of two products.

For example:

                  Year 1                   Year 2
Orange      $2.50                     $3.00
Apple         $2.00                     $4.50

Now have a look at orange. The absolute price of orange increased (from $2 to $2.50), but it's relative price has actually decreased (orange is now cheaper than apple).

TLDR; relative price is comparing the price movement of two or more goods over time