Microeconomics uses constant dollar prices when analyzing markets because

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    Constant dollar price calculations enable microeconomic decision makers to estimate the inflation rate.
     Relative rather than nominal prices drive consumer and producer decisions, and relative price trends are easier to spot once inflation has been removed from the price data.
     The constant dollar price of a good is easier to calculate than the nominal price, enabling quick market decisions to be made.
     The change in prices over time is unimportant to microeconomic analysts.
asked May 30, 2013 in Economics by anonymous
    

1 Answer

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Relative rather than nominal prices drive consumer and producer decisions, and relative price trends are easier to spot once inflation has been removed from the price data.
answered May 31, 2013 by Xyz ~Expert~ (3,650 points)



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