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32 votes
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Should selling price depend on product quality or on work to produce the product if both not in positive correlation?

No one is "right" here, there is rarely a "should" in economics, it is not about morals. When making a purchase, you are usually willing to pay an amount $x$ larger than the price $...
Giskard's user avatar
  • 29.3k
11 votes

Should selling price depend on product quality or on work to produce the product if both not in positive correlation?

What's right here is that people who are experts on a subject generally know a lot more about it than people who have a cursory understanding of a topic. That applies to almost any human endeavor. ...
Itsme2003's user avatar
  • 211
8 votes
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Why does the Brexit cause a fall in crude oil prices?

I'd like to extend Lasse's excellent answer. Fear and uncertainty are driving markets - but they can drive prices in either direction of course. Specifically what's happening here is that the oil ...
410 gone's user avatar
  • 8,168
6 votes

What's the logic behind dividing rental price of capital and wage rate by price level?

Price level is the general level of prices in an economy. It is a variable that indicates what is the purchasing power of money (see Blanchard et al. Macroeconomics: a European Perspective). You can ...
1muflon1's user avatar
  • 56.9k
6 votes

Should selling price depend on product quality or on work to produce the product if both not in positive correlation?

For a product to exist in a competitive marketplace at a higher price, it must both provide higher value, and have higher cost. Note that the "provide higher value" requirement is merely ...
Acccumulation's user avatar
5 votes
Accepted

About the 9 tests on Index number theory to evaluate the efficency of the different types of price indexes

Are this test used nowadays? Is there a more recent paper about it? As far as I know, (theoretical) index number theory is not so popular anymore nowadays. The feeling is probably that we know most ...
tdm's user avatar
  • 12.4k
4 votes

Why does the Brexit cause a fall in crude oil prices?

Fear and uncertainty. Stock markets have plummeted. Currency has plummeted. Noone really knows what is going to happen and hence economic future development is very unsure. Thats whats driving the ...
Thorst's user avatar
  • 835
3 votes

What's the logic behind dividing rental price of capital and wage rate by price level?

You should interpret $P$ as being the price of some bundle of goods people want to consume. Then if we have some monetary amount (in dollars, euro's or some other monetary unit of account), let's call ...
user18214's user avatar
  • 805
3 votes
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Puzzle: Fairness of consumer price indices

The economic purpose of the CPI is to convert nominal units of consumption (goods and services) into real units of consumption. I understand that the CPI is used for other many purposes, but that's ...
BKay's user avatar
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3 votes
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Difference between chained CPI and normal CPI in simple terms

The consumer price index is used to measure the rate at which prices increase. It is calculated by taking a basked of common goods that people buy all the time (groceries, appliances, etc.) and ...
Ubiquitous's user avatar
2 votes

What is autocorrelation of prices?

Autocorrelated is the opposite of independent, which is a term easier to understand (and explain). If you throw one die, the probability of getting the number any number is 1/6. If you throw it again, ...
Ulises Genis's user avatar
2 votes
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Why does an increase in money cause a proportionate increase in price level according to classical/neoclassical economists?

It's a bit hard to answer without a precise model structure, but normally an increase in money will propagate into an increase in nominal demand. For the sake of simplicity, suppose money is ...
Bob's user avatar
  • 146
2 votes

Why did the price level of government consumption increase in the United States?

The price level of government consumption (education, parts of health care, police etc.) consists mainly of wages. Since the productivity (as we measure it) of government production often does not ...
Merijn Knibbe's user avatar
2 votes
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Basic New Keynesian Model - Price and Wage Level after shock

Try to give a look at what happens to inflation's IRF. If it stays positive for the whole horizon of the IRF then simply prices have increased over time at the inflation rate. I guess that any non-...
Ceschi's user avatar
  • 106
2 votes

What effect has the 30% increase in money supply from Feb-June of 2020 had?

I pretty much agree with the answer that Brian provided except for: As for the effect of monetary aggregates, there are any number of reasons to expect that their changes will have no observable ...
1muflon1's user avatar
  • 56.9k
2 votes

Should Prices (or Price Indices) be modelled with deterministic trend?

Should Prices (or Price Indices) be modelled with deterministic trend? Often yes. Prices could have time trend for various reasons. For example, the most obvious one is inflation. While inflation is ...
1muflon1's user avatar
  • 56.9k
2 votes

Why are imported Chinese products in India cheaper than those locally produced?

Consider an exact same product, say an umbrella, which is both imported from China in India and locally produced. The reason why the Chinese product is cheaper compared to the local one could be ...
emeryville's user avatar
  • 6,975
2 votes

Real Exchange Rates calculation

you cannot compute real exchange rates based on the data you have. What you can do, and what is often done (not sure what it is good for though) is to use relative PPP to calculate changes in RER ...
Tobias's user avatar
  • 970
1 vote
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Have governments ever defaulted on its public domestic debt or treasury bonds?

Has there ever been a time when a government defaulted on its due to a country's economic state, such as hyperinflation, or for some national or international political issue? Yes, since default ...
1muflon1's user avatar
  • 56.9k
1 vote

Does the tech sector show that we can live with deflation?

Is it possible for a society to live with deflationary prices and suffer no ill effects? No, if you count above average unemployment, deeper recession and potentially more sluggish growth as “ill ...
1muflon1's user avatar
  • 56.9k
1 vote

What effect has the 30% increase in money supply from Feb-June of 2020 had?

As currently written, the question text (and not the title) refers to both the fiscal stimulus and the increase in various monetary aggregates. These are two different things. On the fiscal side, the ...
Brian Romanchuk's user avatar
1 vote

Why doesn't AD curve self-correct to higher price level in LR?

It does, in the long-run. It's partly a question of response time, and as you outline, AD has intervening steps that AS does not (wages in most markets are sticky and take time to adjust, while ...
heh's user avatar
  • 1,806
1 vote
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Real exchange rate of India and United State?

Presumably one bundle of goods and services which costs about USD 113 in the United States would cost about USD 29 in India so the bundle which costs about USD 113 in the United States would cost ...
Henry's user avatar
  • 4,765
1 vote
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Price Level and Value of money

We need to keep two things seperate: the unit of account, and instruments. The unit of account is a currency unit, like the U.S. dollar. When the price level (e.g., CPI) rises, the cost of goods ...
Brian Romanchuk's user avatar
1 vote

Why are imported Chinese products in India cheaper than those locally produced?

The cost of the umbrella is the sum of the cost of input raw resources (wood / plastics / metal / fabric), labor, transport and retail. Assuming the retail costs are the same (you're buying in the ...
JoaoBotelho's user avatar
  • 2,155
1 vote
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Inflation , Housing Prices, Is there some form of the CPI that can include Home Prices?

You may correlate between household debt and rising home price, but correlation does not denote causation. In the scenario of property bubbles, Banks allow over-leverage with all sort of facilities ...
mootmoot's user avatar
  • 381
1 vote

Inflation , Housing Prices, Is there some form of the CPI that can include Home Prices?

House price increases lead to increases in wealth for homeowners and increases in rental payments for renters. Thus, unlike for consumer products of the CPI like vegetables, milk, cheese, meat, or ...
goingaround's user avatar
1 vote

Why are prices considered the best information we could have?

Prices are easy to observe. However, they do not contain information about externalities (or other market imperfections), so while they are the most commonly used source of information by consumers ...
nathanwww's user avatar
  • 626
1 vote

Why are prices considered the best information we could have?

Concerning austrians and their general attitude towards prices: https://mises.org/library/source-prices. In short Mises says that The ultimate source of the determination of prices is the value ...
JFugger_jr's user avatar
1 vote

Does non-binding price ceiling effect the market?

No there is no impact at all. A price ceiling of $10 means that the price cannot go above $10. Since the equilibrium price is ...
TheSaint321's user avatar

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