Question

Suppose that the price of peanut butter is $3 per pound and the price of almond butter is $5 per pound. If the price of peanut butter rises to $3.60 and the price of almond butter rises to $5.50, then the absolute price of peanut butter has _______________ and the relative price of peanut butter has _______________.A) risen; fallenB) fallen; risenC) risen; risenD) fallen; fallen

Answer 1

Answer:

The correct answer is letter "A": risen; fallen.

Explanation:

Absolute price is the amount of money necessary to exchange the money for an object. In the example, the absolute price to obtain peanut butter at first is $3 but it increased to $3.60. Relative price represents the difference between the prices of two goods that shows how much more a unit of that good is worth in reference to the other. The relative price of peanut butter over almond butter at first was $2 ($5 - $3 = $2). After the price raised the relative price of peanut butter deceased to $1.9 ($5.5 - $3.6 = $1.9).