Question

question 9 (10 points)
suppose the price of apple airpods increased from $100 to $140, and the price of comparable headphones increased from $100 to $130. how have the nominal and relative prices changed?

a) the nominal prices of both headphones have increased, and the relative price of the apple airpods has fallen.

b) the nominal prices of both headphones have decreased, and the relative price of the apple airpods has fallen.

c) the nominal prices of both headphones have increased, and the relative price of the apple airpods has risen.

d) the nominal prices of both headphones have decreased, and the relative price of the apple airpods has risen.

Explanation:

Step1: Analyze nominal price changes

Apple AirPods: $\$100 \to \$140$ (increase). Comparable headphones: $\$100 \to \$130$ (increase).

Step2: Calculate initial relative price

Relative price of AirPods = $\frac{\text{Price of AirPods}}{\text{Price of comparable headphones}} = \frac{100}{100} = 1$

Step3: Calculate new relative price

New relative price = $\frac{140}{130} \approx 1.077$

Step4: Compare relative prices

$1.077 > 1$, so relative price rose.

Answer:

c) The nominal prices of both headphones have increased, and the relative price of the Apple AirPods has risen.