Asked by Manal Al-Hashmi on May 19, 2024
Verified
If there is inflation, then a firm that has kept its price fixed for some time will have a
A) high relative price.Relative-price variability rises as the inflation rate rises.
B) high relative price.Relative-price variability falls as the inflation rate rises.
C) low relative price.Relative-price variability rises as the inflation rate rises.
D) low relative price.Relative-price variability falls as the inflation rate rises.
Relative-price Variability
Fluctuations in the price of one good or service in relation to others, affecting purchasing decisions and economic equilibrium.
Inflation Rate
A measure of how quickly the cost of goods and services rises, thereby reducing the purchasing power.
Fixed Price
A pricing strategy where the selling price of a product or service is set and not subject to change based on market fluctuations or bargaining.
- Assess the impact of inflation on consumer choices and the effectiveness of the market.
Verified Answer
CC
Carla CuellarMay 25, 2024
Final Answer :
C
Explanation :
Inflation means the general level of prices is rising. If a firm has not changed its prices, its prices will be relatively lower compared to others who have adjusted their prices upwards. Relative-price variability tends to increase with inflation because different firms adjust their prices at different times and by different amounts.
Learning Objectives
- Assess the impact of inflation on consumer choices and the effectiveness of the market.