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]]