Suppose a technological advancement makes automobiles 50% safer,and at the same time,the prices of automobiles go up by 25%.No other prices in the economy changed.Did the relative price of automobiles rise or fall?
A) It depends on whether the safety improvements raise the cost of producing automobiles by more than, less than, or exactly 25%.
B) The relative price of automobiles rose because the price went up by 25% when other prices did not rise.
C) The relative price of automobiles fell because the price increased by 25% but the safety increased by 50%.
D) It depends on whether consumers demand safer cars.

Question

Quizplus · Accepted Answer

It is sometimes difficult to disentangle pure price changes from quality improvements.

Suppose a Technological Advancement Makes Automobiles 50% Safer,and at the Same