Suppose over the last year that the price of iron ore increased from $1,200 a ton to $1,300 a ton. Over the same time a measure of the overall price level increased from 168 to 187. The price of iron ore increased by
A)less than inflation, and this means it became relatively less scarce.
B)less than inflation, and this means it became scarcer.
C)more than inflation, and this means it became scarcer.
D)more than inflation, but this doesn't necessarily mean that it become scarcer.

Question

Quizplus · Accepted Answer

The price of iron ore increased from $1,200 to $1,300, a 8.3% increase. Meanwhile, the overall price level increased from 168 to 187, a 11.3% increase. Therefore, the price of iron ore increased by less than inflation. This also means that the relative scarcity of iron ore decreased, as it became more widely available or there was an increased supply.

Suppose Over the Last Year That the Price of Iron