   Chapter 4, Problem 10QP

Chapter
Section
Textbook Problem

If the absolute price of good X is $10 and the absolute price of good Y is$14, then what is (a) the relative price of good X in terms of good Y and (b) the relative price of good Y in terms of good X?

(a)

To determine

The relative price.

Explanation

The relative price of a good is measured as the price of a good expressed in terms of another good. When the absolute prices of two goods X and Y are given, the relative price of good X in terms of good Y can be calculated using Equation (1) as follows:

Relative priceX=Absolute PriceXAbsolute PriceY (1)

The absolute price of good X is $10 and the absolute price of good Y is$14

(b)

To determine

The relative price.

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