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Economics (MindTap Course List)

13th Edition
Roger A. Arnold
ISBN: 9781337617383

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BuyFindarrow_forward

Economics (MindTap Course List)

13th Edition
Roger A. Arnold
ISBN: 9781337617383
Textbook Problem

The absolute prices of goods X, Y, and Z are $23, $42, and $56, respectively. What is the relative price of X in terms of Y?. What is the relative price of Y in terms of Z? What is the relative price of Z in terms of X?

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)

Given the absolute price of good X is $23, the absolute price of good Y is $42, and the absolute price of good Z is $56.

The relative price of good X in terms of good Y can be calculated by substituting the respective values in Equation (1) as follows:

Relative priceXY=2342=0.55

This implies that 1X=0.55Y

Thus, the relative price of good X in terms of good Y is 0

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