# Price Inflation/Deflation Puzzle and ANSWERS

Answers added at bottom.

Imagine a candy like M&Ms which comes in a single size package.

Last year a package contained 100 candies and was priced at a dollar.

This year a package contains 110 candies and is priced at $1.05.

Does this represent price inflation and a reduction in the objective exchange value of the dollar OR

does it represent price deflation and an increase in the objective exchange value of the dollar?

For any quantity of candies in the package between 90 and 110 and independently, a price between $0.90 and $1.10, what is a general rule for price inflation/deflation and a decrease/increase in the objective exchange value of the dollar?

Repeat the above, substituting cough drops for candy.

ANSWERS --

For a package of candies that is roughly a single serving it is only its price that matters, not its precise content quantity. You are subjectively consuming a package of candy, not 90 or 110 individual candies, so price inflation/deflation is tied to the total package price.

Cough drops are a different matter, as they are consumed one at a time, and a smaller quantity in the package will require the purchase of a new package sooner. Here, the price per cough drop is the determining factor.

## inflation

Hi Don,

As stated, there is insufficient information to make a determination. We have no means of determining the supply and demand for candy, this particular candy, and for all other uses/potential uses for money in this economy. We have no means of determining the supply and demand for money in this economy either. All we can say at this point is that each candy nominally sold for a penny last year and is 110/105 for a penny this year.

## Charles, As stated, there is

Charles, As stated, there is insufficient information to make a determination. We have no means of determining the supply and demand for candy, this particular candy, and for all other uses/potential uses for money in this economy. We have no means of determining the supply and demand for money in this economy either. All we can say at this point is that each candy nominally sold for a penny last year and is 110/105 for a penny this year.All I'm looking for is the directional effects of the change if everything else in the economy is unchanged, or alternatively, everything else in the economy changes to produce the same effect.

Regards, Don

## In my country per-mass

In my country per-mass prices are always given along with the unit price. Makes the problem irrelevant.

## Jesrad, In my country

Jesrad,

In my country per-mass prices are always given along with the unit price. Makes the problem irrelevant.Not at all, the fact of unit pricing is what's irrelevant. This is NOT a problem that depends on any ignorance on the part of the consumer.

Regards, Don

## Nothing really

It doesn't represent anything really.