by Frank Shostak
Mises.org
The price or the rate of exchange of one good in terms of another is the amount of the other good divided by the amount of the first good. In the money economy, price will be the amount of money divided by the amount of the first good.
Suppose two transactions were conducted. In the first transaction, one TV set is exchanged for $1,000. In the second transaction one shirt is exchanged for $40. The price or the rate of exchange in the first transaction is $1,000 per TV set. The price in the second transaction is $40 per shirt. Could we then establish the average price paid in these two transactions?
In order to calculate the average price, we must add these two ratios and divide them by two. However, $1,000 per TV set cannot be added to $40 per shirt, implying that it is not possible to establish the average price.