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The art of economics consists in looking not merely at the immediate but at the longer effects of any act or policy; it consists in tracing the consequences of that policy not merely for one group but for all groups.

Henry Hazlitt
Economics in One Lesson

A Pricing Model

The Difference Between
Direct Prices and Money Prices

People frequently don't know, or forget, that exchanges using money amount, in the final analysis, to goods for goods exchanges—using money as a medium for making the exchanges indirectly. As a result they also ignore the fact that money prices reflect the direct exchange rate (price) of those goods.

The pricing model on the following pages demonstrates the interactive relationships involved in pricing—direct prices and money prices.

Move to the Introduction of the Pricing Model
Economic Systems