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relative prices meaning

  "relative prices" in a sentence
  • [Economics]
    The pattern of prices of different real goods and services. This is distinguished from actual money prices. Two sets of actual prices represent the same set of relative prices if it is possible to change one set to the other by multiplying by any constant λ. It has been argued that in any economy the level of absolute prices is mainly set by monetary factors, while the structure of relative prices is set by real factors. This cannot be true in the short run, as different prices are affected to differing extents by contract or government controls, so that during inflation or deflation of the general price level actual prices do not correspond exactly to an equilibrium price structure. The relative prices of different financial assets are clearly not independent of monetary factors.

Examples

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  1. assuming that both goods are competitively supplied, the relative costs of each good will dictate relative prices.
  2. for another, changesin relative prices within the euro zone explain only so much
  3. marketing decides the relative price of each item and the adoption of the new creative achievements
  4. a basic function of institutions is to provide stability and continuity by dampening the effects of relative price changes
  5. the global rebalancing framework views currency realignments as the functional equivalent of a shift in the world s relative price structure

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