Which one of the following statements is TRUE?
A) If the money price of a good increases, its relative price necessarily increases.
B) If the money price of a good increases, its relative price necessarily decreases.
C) The relative price of a good refers to the opportunity cost of purchasing it.
D) Rational consumers always ignore the monetary price of a good when deciding whether to buy it.

Question

Quizplus · Accepted Answer

The relative price of a good refers to the opportunity cost of purchasing it, which means the price of one good in terms of another good. It is not necessarily tied to the money price of the good. Therefore, statement A and B are both incorrect. Statement D is also incorrect since rational consumers take into consideration both the monetary price and the opportunity cost when making a decision to buy a good.

Which One of the Following Statements Is TRUE