Purchasing power
217149
211277943
2008-05-09T15:53:59Z
Minnaert
1782213
/* See also */ add group buying power
'''Purchasing power''' is the amount of value of a good/services compared to the amount paid. As [[Adam Smith]] noted, having money gives one the ability to "command" others' [[Labor (economics)|labor]], so purchasing power to some extent is power over other people, to the extent that they are willing to trade their labor or goods for [[money]].
If money income stays the same, but the [[price level]] increases, the purchasing power of that income falls. [[Inflation]] does not ''always'' imply falling purchasing power of one's [[real income]], since one's money income may rise faster than inflation.
For a [[price index]], its value in the base year is usually normalized to a value of 100 in the base year. The formula for purchasing power of a unit of money, say a dollar, relative to a standard price index ''P'' in a given year is 1/(P/100). So, by definition the purchasing power of a dollar decreases as the price level rises.
==See also==
*[[Purchasing power parity]]
*[[Consumer Price Index]]
*[[Fair Trade]]
*[[Free Trade]]
*[[Group buy]]
*[[Collective buying power]]
==External Links==
*[http://www.measuringworth.com/ MeasuringWorth.com] has a [http://www.measuringworth.com/uscompare/ calculator] with 7 different measures for bringing US $ values from the late 1700s up to any year until 2006. The [http://www.measuringworth.com/worthmeasures.html Measures of Worth page] discusses which would be the most appropriate for different things.
* [http://demonstrations.wolfram.com/PurchasingPowerCalculator/ Purchasing Power Calculator] by Fiona Maclachlan, [[The Wolfram Demonstrations Project]].
{{econ-stub}}
[[Category:Socioeconomics]]
[[bg:Покупателна способност]]
[[cs:Kupní síla]]
[[de:Kaufkraft (Konsum)]]
[[el:Αγοραστική δύναμη]]
[[fr:Pouvoir d'achat]]
[[gl:Poder adquisitivo]]
[[ko:구매력]]
[[it:Potere d'acquisto]]
[[lt:Perkamoji galia]]
[[mk:Платежна моќ]]
[[nl:Koopkracht]]
[[pl:Siła nabywcza]]
[[ru:Покупательная способность]]
[[fi:Ostovoima]]
[[sv:Köpkraft]]
[[zh:購買力]]