Asked by David Garcia on May 11, 2024
Verified
The price of a certain farm product was $2.00 in the base period when the parity ratio was 100. If the index of prices paid by farmers is now at 130, then the parity price of this farm product today should be
A) 1.40.
B) 2.60.
C) 2.30.
D) 1.70.
Parity Ratio
A measure used to compare the price or value of one thing to another, often in agriculture to compare prices of farm products to other goods and services over time.
Parity Price
Parity price is a price level that ensures farmers receive a relative value for their commodities comparable to the purchasing power of a certain base period.
- Comprehend the principle of parity within the context of agricultural policy and its real-world applications.
Verified Answer
JH
Jasmine HandyMay 14, 2024
Final Answer :
B
Explanation :
The parity price can be calculated by multiplying the base price by the current index of prices paid by farmers and then dividing by the base index (which is 100 in this case). So, the calculation is $2.00 * 130 / 100 = $2.60.
Learning Objectives
- Comprehend the principle of parity within the context of agricultural policy and its real-world applications.