32
votes
Accepted
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 $...
- 28.7k
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.
...
- 211
8
votes
Accepted
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 ...
- 8,123
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 ...
- 729
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 ...
- 54.4k
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 ...
- 10.3k
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 ...
- 835
4
votes
Accepted
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, ...
- 33.4k
3
votes
Accepted
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 ...
- 16.3k
3
votes
Accepted
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 ...
- 16.9k
3
votes
Change in price and income using the Slutsky equation
The question is not asking what you solved. You literally gave how much income would be needed by buy $90$ bottles at the new price. What the question is asking is basically "calculate the income ...
- 260
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 ...
- 805
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 ...
2
votes
Accepted
Inverting price functions and their conditions/intervals
Notice that if you plug in $P=15$ into either of the $Q(P)$, you get
$$Q(P) = 700-40P = 700 - 40 \cdot 15 = 100$$
$$Q(P) = 400-20P = 400 - 20 \cdot 15 = 100$$
So you can take the exercise further ...
- 6,578
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, ...
- 374
2
votes
Accepted
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 ...
- 146
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 ...
- 970
2
votes
Does the Fed use misinformation as a tool for good monetary policy?
The closest thing to an answer I could give to this is that it is not in the Federal Reserve's interest to lie, particularly about the targeted inflation rate. Businesses would catch on to what the ...
- 6,578
2
votes
What kind of policy is minimum wage?
Looking up each of those terms you ask about would have given you your answer.
Fiscal policy is economic policy enacted through government. The minimum wage is a type of fiscal policy.
Monetary ...
- 6,578
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 ...
- 6,885
2
votes
Accepted
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-...
- 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 ...
- 54.4k
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 ...
- 54.4k
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 ...
- 9,852
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 ...
- 1,808
1
vote
Accepted
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 ...
- 4,755
1
vote
Accepted
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 ...
- 9,852
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 ...
- 2,145
1
vote
Accepted
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 ...
- 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 ...
- 111
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