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One thing is sure that price changes occur only when the prices of goods or services are different from what they were previously in the same market. For example, if Company A purchases 100kg of Apples for $100 from Company B and resells it to Company C for $110, it is not price change. Price change will occur only if Company A now start charging Company B more or less than $100 per 100kg of Apples or Company B now start charging Company C more or less than $110 per 100kg of Apples or both Company A and Company B now start charging more or less for 100kg of Apples.
Basically price changes can be divided in the classes as follows:
1. General Price Changes
2. Specific Price Changes
3. Relative Price Changes
General Price-Level Changes
General price-level changes reflect the value of the monetary unit over time. ... Changes in commodity prices or a discrepancy between total supply and demand of goods and services can also lead to general price changes.
Because prices change at different rates, general price changes can only be measured by calculating the average level of current prices and comparing it with a base period. Products and services change over time and good comparisons can only be drawn if goods and services are the same or similar at both dates. The ratio between the current prices and the base prices reflect the change in the price index.
Approximate Word count = 1209
Approximate Pages = 4.8
(250 words per page double spaced)
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