Suppose that the price of butter is $3 per pound and the price of margarine is $2 per pound.If the price of butter rises to $3.90 and the price of margarine rises to $2.20,then the absolute price of butter has _______________ and the relative price of butter has _______________.
A) risen; fallen
B) fallen; risen
C) risen; risen
D) fallen; fallen

Question

Quizplus · Accepted Answer

The absolute price of butter has risen from $3 to $3.90, indicating an increase. The relative price of butter, in terms of margarine, has also risen because initially, one pound of butter was equivalent to 1.5 pounds of margarine ($3/$2), but after the price change, one pound of butter is equivalent to 1.7727 pounds of margarine ($3.90/$2.20), indicating an increase in the relative price of butter compared to margarine.

Suppose That the Price of Butter Is $3 Per Pound