Summary

I hope you can see from these direct exchange examples that only changes in the amounts of the products exchanged will affect prices (the ratios of the quantities of goods exchanged.) When we assume that sales have a fixed relationship to production, increasing production will lead to decreasing relative prices, and decreasing production will lead to increasing relative prices.

Understanding this relationship should set the stage of a better understanding of dollar prices. To save referring back to this section I have included direct exchange price charts along with charts depicting dollar prices.