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Footwear Prices Rise at Fastest Rate in 5 Months

EconEye Admin

In September, women’s footwear prices rose 2.1 percent and kid’s footwear prices rose 1.1 percent. That was offset by a decline in men’s footwear prices, which were down 1 percent.—footwearnews.com

Answer the following questions to check your understanding of the story.

How did the relative price of kid’s footwear change in September?

The relative price of kid’s footwear __________ with respect to men’s footwear and __________ with respect to women’s footwear.

Wrong! - The relative price of kid’s footwear with respect to men’s footwear is the money price of kid’s footwear divided by the money price of men’s footwear. The relative price of kid’s footwear with respect to women’s footwear is calculated similarly. Did these relative prices change in September?

Correct! - The relative price of kid’s footwear with respect to men’s footwear is the money price of kid’s footwear divided by the money price of men’s footwear. The relative price of kid’s footwear with respect to women’s footwear is calculated similarly. The money price of kid’s footwear rose and the money price of men’s footwear fell, so the relative price of kid’s footwear with respect to men’s footwear rose. The money price of women’s footwear rose by more than the money price of kid’s footwear rose, so the relative price of kid’s footwear with respect to women’s footwear fell.

If the price of a pair of children’s running shoes is $100 and the price of a pair of woman’s sandals is $50, what is the opportunity cost of buying a pair of running shoes in terms of sandals?

Wrong! - Does an opportunity cost equal the money price or a relative price? How is a relative price calculated?

Well Done! - The opportunity cost of buying a pair of running shoes is the best alternative forgone, which equals the relative price of a pair of running shoes—2 pairs of sandals.

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