1 2 3 4 $1.96 1.78 1.62 1.47 $0.94 1.04 1.04 1.14 $1.86 2.08 1.83 1.88 Instructions: Round your answers to two decimal places. a. For each year, calculate the CPI, using year 1 as the base year. In year 1, the CPI was In year 2, the CPI was In year 3, the CPI was In year 4, the CPI was b. For each year, calculate the CPI, using year 3 as the base year. In year 1, the CPI was In year 2, the CPI was

1 2 3 4 $1.96 1.78 1.62 1.47 $0.94 1.04 1.04 1.14 $1.86 2.08 1.83 1.88 Instructions: Round your answers to two decimal places. a. For each year, calculate the CPI, using year 1 as the base year. In year 1, the CPI was In year 2, the CPI was In year 3, the CPI was In year 4, the CPI was b. For each year, calculate the CPI, using year 3 as the base year. In year 1, the CPI was In year 2, the CPI was

Essentials of Economics (MindTap Course List)

8th Edition

ISBN:9781337091992

Author:N. Gregory Mankiw

Publisher:N. Gregory Mankiw

Chapter16: Measuring The Cost Of Living

Section: Chapter Questions

Problem 3CQQ

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In Felixania, cat food constitutes 45 percent of the typical basket of goods for a typical consumer, dog food constitutes 3 percent, and all other goods constitute the remaining 52 percent. Assume the price of cat food rises by 4 percent, the price of dog food falls by 10 percent, and prices remain constant for all other goods. Based on the information given, we can definitely say CORRECT ANSWER: the consumer price index (CPI) in Felixania is more than in the previous year. Note:- Do not provide handwritten solution. Maintain accuracy and quality in your answer. Take care of plagiarism. Answer completely. You will get up vote for sure.
The CPI index is calculated for consumers with the Cobb-Douglas utility function u(x,y)= xy2 over goods food (x) and clothing (y), where the reference basket is A = (10,20) , that is 10 units of food and 20 units of clothing. The initial prices are px = py = 1 and the final prices are px = 2, py = 16. (a) Calculate the CPI (consumer price index) which is the ratio of the cost of the basket A under the final prices divided by its cost under the initial prices. (b) Naturally, given the prices increase disproportionately, we can expect the consumer not to stick with the basket A but choose another basket B where she achieves the same utility level as in A, but which costs much cheaper, under the final prices. Calculate the basket B which is the cheapest bundle under the final prices to achieve the utility level of A. Calculate the effective CPI, which is the cost of basket B under the final prices divided by the cost of A under the initial prices. This reflects the real increase in…
Assume that people in an economy only consume the following goods shown in the table: Rice Meat Juice Year 1 price P2 P4 P1 Year 1 quantity 100 100 200 Year 2 price P2 P6 P2 Year 2 quantity 100 100 200 Calculate the % change in the price of every goods. Using the same method with the CPI, calculate the % change of the overall price level. If you were to learn that juice increased in size from Year 1 to Year 2, should that information affects your calculation of the inflation rate? If so, how? If you were to learn that juice introduced new flavors in Year 2, should that information affect your calculation of the inflation rate? If so, how?
ZPharma Co., a pharmaceutical company, sells three different products:Zdiet, a Weight Loss Medication, Zataflam, a Non-Steroidal Anti-Inflammatory and Zolymox, an Antibiotic. Due to a new government regulation regarding pricing medications, suppose that the prices of these products have increased as follows: Zdiet (25%), Zataflam, (20%) and Zolymox, (10%). As a result, the monthly quantity sold from each product declined by the following percentages: Zdiet (35%), Zataflam (12%), and Zolymox (5%).Calculate the price elasticity of demand for the three products: Zdiet, Zataflam and Zolymox. Interpret your results to the best of your ability. Analyze the potential effect of the increase in prices on sales revenue of each product. Now, suppose the decline in demand indicated above was caused by a 20% decrease in income level. How would you best describe each product?
Many elderly people in the US receive Social Security payments as their sole source of income. Because of this, there have been attempts to adjust these payments so as to keep up with changing prices (inflation). This process is called “indexing”; this question will lead you through the process. Suppose that in the year 2018, a typical Social Security recipient consumed only Food (F) and Housing (H). The price of housing was $150/unit and the price of food was $50/unit. Denote the quantities of food and housing per month by F and H respectively. This consumer received $1500/month and consumed 5 units of housing and 15 units of food. (a) Write out the consumer’s budget constraint and demonstrate that the bundle chosen falls on that budget constraint. (b) Draw the budget constraint on a graph (Housing on the horizontal axis) with the optimal bundle labeled. Draw the indifference curve through that optimal bundle. Assume preferences are well behaved. Suppose that in 2019, the price of…
The following table lists the per gallon prices of gas and milk for the months of April, May, and June. Assume that the typical consumer buys 60 gallons of gas and 4 gallons of milk each month, and that April is the base period. What is the consumer price index for May?
1.Using 2016 as the base year, calculate the Laspeyre’s Quantity Index for 2021.A 138.60B 207.47C 72.15D 149.862.In general, consumers are price-takers; thus, they are expected to react to price changes by substituting ice-creamflavours that have become relatively cheaper for those that have become relatively more expensive. This phenomenon isconsistent with the substitution effect. Substitution tends to cause a negative correlation between the price and quantityrelatives.With regard to the observation above, and the indices calculated above, which of the following is false?A The transaction data on the ice-cream sales is not indicative of substitution effect.B The Paasche’s indices are relatively greater than the Laspeyre’s indices.C The price and quantity relatives of the ice-cream data are positively correlated.D The price and quantity relatives of the ice-cream data are negatively correlated.
Mr Adam was purchasing 1 kg daal and 6 kg rice. This week Mr Adam is purchasing 2 kg daal and 5 kg rice. What can you conclude from the given information? Discuss all conclusions in detail.
Problem Set 2: Consumer Price Index Suppose that people consume only three goods, as shown in this table: Tennis Balls Golf Balls Bottles of Pepsi Cola 2017 price € 3 € 5 € 1 2017 quantity 100 100 200 2018 price € 3 € 6 € 2 2018 quantity 100 100 200 What is the percentage change in the price of each of the three goods? Using a method similar to the CPI, compute the percentage change in the overall price If you were to learn that a bottle of Pepsi Cola increased in size from 2017 to 2018, should that information affect your calculation of the inflation rate? If so, how?
Problem Set 2: Consumer Price Index Suppose that people consume only three goods, as shown in this table: Tennis Balls Golf Balls Bottles of Pepsi Cola 2017 price € 3 € 5 € 1 2017 quantity 100 100 200 2018 price € 3 € 6 € 2 2018 quantity 100 100 200 What is the percentage change in the price of each of the three goods? Using a method similar to the CPI, compute the percentage change in the overall price If you were to learn that a bottle of Pepsi Cola increased in size from 2017 to 2018, should that information affect your calculation of the inflation rate? If so, how? If you were to learn that Pepsi Cola introduced new flavors in 2018, should that information affect your calculation of the inflation rate? If so, how?
What does this graph below show: Table 2. Percentage of UK consumer prices that change each month CPI excluding promotions: it is a measure of average prices that excludes goods that are subjected to some temporary discount or promotion; Price reversals: they refer to situations where, following a rise or fall in any given price, the subsequent change is an exact reversal to the original price
Year 2000 2010 Price of an automobile $40, 000 $50, 000 Price of a loaf bread $20 $30 Number of ao=utomobiles produced 100 cars 120 cars Number of loaves of bread produced 600,000 loaves 500, 000 loaves Using the table above calculate: how much have prices risen between the year 2000 and 2010 and comapre the answer given by Laspeyres and Passche price indices