There are two goods in the economy: tea and rice.If the relative price of tea has increased it could be a result of
A) a decrease in the absolute price of rice.
B) an increase in the absolute price of tea.
C) an increase in the absolute price of rice.
D) a and b

Question

Quizplus · Accepted Answer

The relative price of tea increases either if the price of tea increases (making it more expensive relative to rice) or if the price of rice decreases (making tea more expensive in comparison). Both A and B are correct scenarios for this to happen.

There Are Two Goods in the Economy: Tea and Rice