A relative price is the
A) price of one good divided by the price of another.
B) price of one good multiplied by the price of another.
C) absolute price of a good.
D) price of a related good.
E) price of a substitute.

Question

Quizplus · Accepted Answer

Relative price is the ratio of the price of one good to the price of another. It helps us understand how the price of one good affects the demand for another good. For example, if the price of coffee increases, the demand for tea (a substitute) may increase because it becomes relatively cheaper compared to coffee.

A Relative Price Is the