Real income is equal to ________ and a relative price is given by ________.
A) the dollar amount of income divided by the dollar price of a good; the dollar price of one good divided by the dollar price of the good whose relative price is being calculated
B) the dollar price of one good divided by the dollar price of the good whose relative price is being calculated; the dollar amount of income divided by the dollar price of a good
C) The dollar price of one good divided by the dollar price of another good; the dollar price of one good divided by the dollar price of the good whose relative price is being calculated
D) the dollar amount of income; real income divided by the dollar amount of income

Question

Quizplus · Accepted Answer

Real income is calculated as the ratio of the dollar amount of income to the dollar price of a good. Relative price is the ratio of the dollar price of one good to the dollar price of another good. Therefore, the first option in choice A is correct, while the second option provides a definition for relative price that is not accurate.

Real Income Is Equal to ________ and a Relative Price