Suppose that initially the price of a bag of jellybeans is $6, and the price of a bottle of cola is $2. If the price of a bottle of cola increases, then the relative price of jellybeans
A) increases.
B) decreases.
C) stays the same, but the relative price of cola increases.
D) stays the same, but the relative price of cola decreases.

Question

Quizplus · Accepted Answer

The relative price of jellybeans is the price of jellybeans in terms of cola. Initially, it is 6/2 = 3 bottles of cola per bag of jellybeans. If the price of cola increases, the denominator in this ratio increases, thus decreasing the relative price of jellybeans.

Suppose That Initially the Price of a Bag of Jellybeans