When a $1,000 mattress does the job, a $3,500 mattress offers poor relative value. While the earnings used in this formula are an estimate and are not as reliable as current or historical earnings data, there is still a benefit to estimated P/E analysis. This statement: "Suppose the Bank of Canada suddenly announced that it would be targeting 0% inflation in future, instead of the 2% inflation it currently targets. I was being somewhat facetious here--so we should be doing that execise after all. Some people, who had been postponing buying computers or cameras, would suddenly stop waiting for next year's better cheaper model, and want to buy this year's instead. Difference Between Vulnerability and Threat, Difference Between Coronavirus and Cold Symptoms, Difference Between Coronavirus and Influenza, Difference Between Coronavirus and Covid 19, Difference Between Business Ethics and Social Responsibility, Difference Between Deja Vu and Premonitions, Difference Between Honed and Polished Marble, Difference Between Cyclopropane Propane and Propene, Difference Between Ionization Energy and Binding Energy, Difference Between Autogenous Theory and Endosymbiotic Theory, Difference Between Ethylene and Ethylidene, Difference Between Spontaneous Generation and Panspermia, Difference Between Pyramid of Biomass and Pyramid of Energy. But suppose the price of everything fell, and fell by the same percentage? First we have to explain the "yes" in the "yes, but" answer (or the "no", in the "no, but" answer). Continuing with the example above where we have a current P/E ratio of 25, suppose the P/E of the market is 20. Ian Lippert | Nick Rowe | Works from Firefox. The absolute value is the value of having something over having nothing. Posted by: And I have forced this 3 dimensional world into a 2 dimensional supply and demand framework, by multiplying quantity of cameras by pixels per camera so we get total quantity of pixels on the horizontal axis, and price per pixel on the vertical axis. Falling prices caused by increased productivity are the appearance of something fantastic. Think about a paper where the highest mark is 55. And suppose people believe this, and expect 0% inflation from now on, instead of the 2% they had previously expected. What does the government do with the extra revenue it gets from the inflation tax, does it spend it or save it? You should be happy your family is protected now and the policy is worth something.”, “When you walked into the bank, your money was all in CDs. The absolute market share of a company is calculated by dividing its sales by the total sales in its market. As such, it can only be used for commodity businesses which involve oil, coal or other such natural resources. In absolute grading, this would be a C. However, in a relative grading system, this can be an A. I would have to do some serious analysis to figure out exactly what those circumstances are. Mandos | December 09, 2011 at 01:25 PM. Or is it more structural? Very much echoes my feelings about teaching introductory ideas in my own field (which you've now inspired me to post about at some point).