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 $...
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16 votes
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From an economics perspective, what are the ramifications of a currency with fixed money supply?

FooBar is quite right that unless you expect GDP growth to stop, fixed nominal supply currencies will lead to deflation. A moderate degree of currency inflation serves a number of useful functions in ...
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  • 16.6k
12 votes
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Does Inflation Make Money Eventually Worthless?

"Worth less" than before - yes, that's exactly what inflation does. "Worthless" - not quite. No percentage-based reduction in value can make something worth 0, but there are extreme examples from ...
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11 votes

From an economics perspective, what are the ramifications of a currency with fixed money supply?

It is a fallacy to conclude that a steady number of coins will give you no change on the monetary value (inflation/deflation). The classical quantity theory of money can be used as a first-order ...
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  • 10.4k
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. ...
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8 votes
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Why doesn't the price of gold drop as mining occurs that produces more gold?

You cannot reason directly from a price change. Prices may increase because supply has fallen or demand has changed. In general we can't distinguish between the two unless we know something about the ...
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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 ...
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  • 8,012
7 votes

From an economics perspective, what are the ramifications of a currency with fixed money supply?

The other answers are correct in respect of what would happen if the money supply of a currency was kept constant, however there is nothing in bitcoins to ensure that money supply will stay fixed ...
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  • 1,428
7 votes

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

This answer is based on my experience in the field of printing. When you get a paper in your hand to copy you copy it. The photocopier will handle almost everything for you. But when you get a ...
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6 votes

Oil Price Chart Scale

Usually, when people use non-equidistant axis, it is because they want to emphasize some variation more than others. For example, if most of your data is between 0 and 1, but you have one outlier on ...
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  • 10.4k
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 ...
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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 ...
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5 votes
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What benefits do OPEC countries obtain by cutting oil supply?

The OPEC scenario is quite well described by a market with Cournot Competition. That is, while collusion would lead the highest total profits to the sum of the participants, each invididual ...
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  • 10.4k
5 votes

Analysis of free goods

You can imagine a demand curve continuing through the x-axis as monetary price becomes negative. A negative price can be interpreted as payment to pick up shirts, a kind of subsidy.* That might tempt ...
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  • 1,105
5 votes
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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 ...
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  • 8,642
4 votes

Analysis of free goods

Consider the politically, ideologically, philosophically and emotionally charged question (let's assume that it is free of framework effects): "If a destitute person asked you for money, would you ...
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4 votes

When would prices increase according to Malthusianism?

This question rests on a few assumptions. So let's dig into them. What Malthus Said First, the Malthusian collapse you are referring to is similar to the Malthusian Trap, from whence it derives, so ...
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4 votes
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Does the Fed use misinformation as a tool for good monetary policy?

This question as is (October 2, 2015, 15:07 Athens time) should be closed and I voted to that effect. I provide an answer in order to show why it should be closed. As any natural or legal entity, ...
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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 ...
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3 votes

Oil Price Chart Scale

As it has already been explained, it's a logarithmic scale (also called log scale for short). The distance between values doesn't depend on their linear difference, but on their relative difference. ...
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3 votes
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Price Elasticity of Demand for Positive Price Increases

Except of the purely descriptive aspect, "elastic demand", or more accurately, regions of the demand schedule where demand elasticity with respect to price is higher than unity, in absolute terms, is ...
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3 votes

Is Price Level equivalent to Inflation when looking at AD/AS and Phillips Curve graphs?

Snoram is correct. Price level is a just that, the relative level of prices. Inflation/deflation is the act of moving up/down price levels. The inflation rate is the difference in price levels from ...
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3 votes

Does Inflation Make Money Eventually Worthless?

Inflation can be seen as a tax on (uninvested) savings really more than anything else. In 100 years, a McDonalds Hamburger will cost \$100 (say), but you'll also see a nominal minimum wage of $400 an ...
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  • 150
3 votes

What is the impact of fracking on oil prices?

over the past few months, the oil harvested from fracking had come onto the market reducing the price of gas. Obviously, this makes no sense insofar as the oil harvested from fracking displaces oil ...
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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 ...
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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 ...
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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 ...
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  • 753
2 votes

What is the impact of fracking on oil prices?

This started as a comment on Stephen Landsburg's answer but was getting too long for the comment format. When a new supply of oil is discovered, it increases the potential new supply. This will ...
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  • 1,152
2 votes

What benefits do OPEC countries obtain by cutting oil supply?

To appreciate why OPEC can´t do this now, we have to understand a little better why they were able to do it in the 1970´s - temporarily at least. The received wisdom on the 70´s crisis is a little ...
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  • 2,720
2 votes

Analysis of free goods

Because nothing is really free. Even if the seller is not charging money for the product, you have to go to some time and effort to get it. Once you get it, it will take up space in your home. It may ...
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