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Market value Market value of a merchandise is a figure representing the exchangeability between two different kind of goods. When bartering, market value end being referenced in expressions such as: "i'll give 3 kg potatoes in exchange for 1 kg wheat", or "in the marketplace you give four loafs of bread in exchange for three kg eggs". We generally refer to th market value of that good we are interested in, and we imporve this by including unit ratios. We therefore should say that the market value of wheat is 2Kp-potatoes/Kg. The concept of Price In a monetarized economy, one must give money in exchange for the desired good. The market value receives now the name "price". Market values will be expressed as "the shop owner will announce "we sell one liter milk in US$2.00". Recall that we use units accompanying the numbers representing the value of a good. Price is expressed referring to the amount of money (say dollars) we pay for a good meassured in a certain unit. For example: 'the price of milk is US$2.00 per liter'. Relative price Relatve price is a retro-conception, for we see it only when considering again the idea of market value. We conceptualize this market value under the label of 'relative price' when we need to analyze consumption behavior in response to intrinsic qualities of some goods, avoiding the influence of money-based phenomenons. Relative price's expresssion is the quotient of the price of one good we are interested in divided by the price of the good we are willing to give in exchange. Absolute price We will label the regular idea of price as 'absolute price'. What really happens is that now that we have the notion of relative price, how should we name the original concept of price? If we have a relative price, then we should be able to compare it with an absolute price. So each time we talk about relative prices, we refer to the original or regular prices of the goods as 'absolute prices'. Terms of Trade International Trade theories usa the concept of 'terms of trade' in order to study trade behavior. The terms of trade are relative prices built using the price of an export commodity as numerator and the price of an import commodity as denominator. ![]() AugustoRufasto ![]() |
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