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At its most basic, a price is the amount of money that a buyer gives to a seller in exchange for a good or a service. When someone hands over $2.00 and receives a pound of tomatoes, the price is straightforward observation: $2.00 a pound.
Price theory is concerned with explaining economic activity in terms of the creation and transfer of value, which includes the trade of goods and services between difierent economic agents. A puzzling question addressed by price theory is, for example: why is water so cheap and diamonds
This video explains the concept of price elasticity of demand and its importance in microeconomics.
price theory--the analysis of why things cost what they do and of how prices function to coordinate economic activity. This book is organized into six sections.
Regular-price rigidity varies with store-formats because different format stores define regular-prices differently. Correspondingly, the meaning of price-cuts varies across store-formats. To interpret the findings, we consider the store pricing format distribution across the US. Key Words:
We study the cyclical properties of sales, regular price changes and average prices paid by consumers (“effective” prices) in a dataset containing prices and quantities sold for numerous retailers across a variety of U.S. metropolitan areas.
A classic example of the price theoretic approach, which I plan to exposit formally in the introduction, is Dixit and Sandmo (1977)’s characterization of optimal linear income taxes in terms of two prices: the elasticity of taxable income with respect to the tax rate and an endogenous measure of post-tax-and-transfer income inequality.
