Answered: Calculate a Laspeyres cost-of-living…

Exploring Economics

8th Edition

ISBN:9781544336329

Author:Robert L. Sexton

Publisher:Robert L. Sexton

Chapter18: Introduction To Macroeconomics: Unemployment, Inflation, And Economic Fluctuations

Section: Chapter Questions

Problem 18P

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Question

100%

Megan

is a college student who consumes food and transportation. Last year, she consumed 90 meals and purchased 100 gallons of gasoline per month. Suppose that last year the price of a meal was

and the price of a gallon of gasoline was

$2.23.

However, this year, the price of a meal is

and the price of a gallon of gasoline is

$3.92.

As a result,

Megan

consumes 100 meals and 80 gallons of gasoline. For this example, assume

Megan's

utility this year is the same as her utility last year (and that her preferences have not changed).

Calculate a Laspeyres cost-of-living index for

Megan

using 100 as the base for last year. In particular, the Laspeyres index for this year is

nothing.

(Enter

your response rounded to two decimal

places.)

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