Question

When the price of one good changes while another​ good's price does not​ change, then there has been a change in the

A.

relative price.

B.

utility price.

C.

absolute price.

D.

marginal utility price.

E.

marginal price.

Answer 1

When the price of one good changes while another good's price does not change,then there has been a change in the

A. relative price

(Relative price is the price of one good divided by the price of another,which means that it is the ratio of two prices.

Suppose price of good A increases while that of good B remains the same,so this makes good A relatively more expensive than B.So consumers will prefer to purchase product B as it is cheaper in comparison to product A,known as the substitution effect ,where consumers substitute goods for one another when there is a change in the relative price of goods.)