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)a decrease in the absolute price of tea.
C)an increase in the absolute price of rice.
D)a simultaneous increase in the absolute price of rice and decrease in the absolute price of tea.

Question

Quizplus · Accepted Answer

If the relative price of tea has increased, it means tea has become more expensive compared to rice. This can happen if the price of rice decreases while the price of tea remains constant, making tea relatively more expensive.

There Are Two Goods in the Economy: Tea and Rice