1. What is a Relative Price Calculator?

Definition: This calculator determines the relative price (RP) by comparing a new price to an old price.

Purpose: It helps economists, analysts, and consumers understand price changes over time or between different products.

2. How Does the Calculator Work?

The calculator uses the formula:

Where:

• \( RP \) — Relative price (dimensionless)
• \( P_{new} \) — New price (currency, e.g., USD)
• \( P_{old} \) — Old price (currency, e.g., USD)

Explanation: The new price is divided by the old price to determine how prices have changed relative to each other.

3. Importance of Relative Price Calculation

Details: Relative prices help analyze inflation, compare product values, and make purchasing decisions by showing price changes in relative terms.

4. Using the Calculator

Tips: Enter both prices in the same currency. All values must be > 0. The result shows how many times more (or less) expensive the new price is compared to the old.

5. Frequently Asked Questions (FAQ)

Q1: What does a relative price of 1.5 mean?
A: It means the new price is 1.5 times (or 50% higher than) the old price.

Q2: What if I get a relative price below 1?
A: A value below 1 indicates the new price is lower than the old price (e.g., 0.8 means 20% cheaper).

Q3: Can I use different currencies?
A: No, both prices must be in the same currency for meaningful comparison.

Q4: How is this different from percentage change?
A: Percentage change shows the difference, while relative price shows the ratio (percentage change = (RP - 1) × 100).

Q5: Why use relative price instead of absolute difference?
A: Relative price accounts for the original price's magnitude, making comparisons across different price levels more meaningful.