<p>I usually ask if they would rather get an IPhone or 5000 South African Rands (ZAR). You can also ask if 5000 ZAR is a good enough monthly salary. As we are far from that country usually no one has a clue about the currency exchange rate.  This way you can explain that the number in itself is meaningless, what matters is what you can exchange it for, i.e. relative prices matter.</p>

CC BY-SA 3.0
2016-08-31T23:27:02.413Z
The examples are great. Thanks. But I was looking for an example along the lines of like if we had (Price of iPhone, Price of Nexus), why would we ever do (1,Price of iPhone/Price of Nexus) and what insight such division brings. It is tough without brining marginal utility concept in I think..
Frank Swanton
CC BY-SA 4.0
2019-04-27T13:45:06.513Z
@FrankSwanton, did you end up finding s good example for your students?
StatsScared
CC BY-SA 3.0
2016-08-28T18:39:01.663Z
2016-08-28T18:39:01.663Z
Giskard
<p>I am trying to clearly explain to the concept of "normalization" or relative prices. Because students are so used to just think of prices in absolute terms, it is initially tough to make the leap to the "relative" or "normalization" concept.</p>

<p>What is your angle if you were to explain this to an econ 101 student?</p>

<p>For example, the toughest part is to explain the "need" for looking at the ratio of prices. Who cares? Why is it useful?</p>

<p>Thanks bunch.</p>

<macroeconomics><microeconomics><consumer-theory>
Clearly explaining the concept of "normalizing" price and relative prices to undergraduate
Frank Swanton
# Clearly explaining the concept of "normalizing" price and relative prices to undergraduate

(Asked by: username_0 on 2016-08-28)

I am trying to clearly explain to the concept of "normalization" or relative prices. Because students are so used to just think of prices in absolute terms, it is initially tough to make the leap to the "relative" or "normalization" concept.

What is your angle if you were to explain this to an econ 101 student?

For example, the toughest part is to explain the "need" for looking at the ratio of prices. Who cares? Why is it useful?

Thanks bunch.

**Tags:** macroeconomics, microeconomics, consumer-theory

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## 1 answers

### Answer by username_1 on 2016-08-28. Score: 1 | Accepted answer

I usually ask if they would rather get an IPhone or 5000 South African Rands (ZAR). You can also ask if 5000 ZAR is a good enough monthly salary. As we are far from that country usually no one has a clue about the currency exchange rate. This way you can explain that the number in itself is meaningless, what matters is what you can exchange it for, i.e. relative prices matter.

> **Comments:**
> **username_0**: The examples are great. Thanks. But I was looking for an example along the lines of like if we had (Price of iPhone, Price of Nexus), why would we ever do (1,Price of iPhone/Price of Nexus) and what insight such division brings. It is tough without brining marginal utility concept in I think..  
> **username_2**: @FrankSwanton, did you end up finding s good example for your students?  

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