How is the price-related differential calculated?

The calculation of the price-related differential is a key aspect of assessing and evaluating property sales data in relation to market values. The correct method involves dividing the mean sales ratio by the aggregate sales ratio.

In this context, the mean sales ratio represents the average of the individual sales ratios across a set of properties. The aggregate sales ratio, on the other hand, provides an overall measure of the relationship between the total value of properties and their sale prices. By dividing these two ratios, you obtain the price-related differential, which helps to highlight potential inequities in property assessments.

This measure can indicate whether lower-valued properties are being assessed too high relative to their sale prices compared to higher-valued properties. A price-related differential of 1 suggests fairness in assessment across the value spectrum, while values above or below this can indicate potential bias in the assessment system.

The other methods mentioned in the choices, such as subtracting costs from total sales, adding all sale prices, or calculating the average price per item, do not effectively represent the complex relationship between assessed values and actual sale prices necessary for determining the price-related differential. These methods may reflect aspects of sales performance or individual cost analysis but do not relate directly to property assessment equity.