Question

What is the difference between a change in relative price and a change in general price? Give an example of each to make you point.

Answer 1

General price	Relative Price
Nominal Value of goods & services in monetary terms	Price of a good w.r.t. another product at in the same time period.
Eg : A chocolate costs Rs 10 in Country X. It means we need Rs 10 to buy a chocolate.	Eg : 1 chocolate = 10 toffee worth of good In order to purchase 1 chocolate, 1 will at least need 10 toffees.
Change in general prices changes with a price change of good. Eg : General price of chocolate increases by increasing price from Rs 10 to Rs 15.	It changes when the price of the other good / relative importance of our good varies. Eg : When we need 15 toffees instead of 10 toffees to buy 1 chocolate, we state either price of toffee reduced or the importance of chocolate rose.