The nation of Kona cultivates coffee beans and cassava, from which all their consumer goods are produced. (a) Calculate the cost of the market basket of goods in the table in 20102010 and in 20152015. Show your work. (b) Use 20102010 as the base year to calculate the price indices for 20102010 and 20152015 for the market basket of goods in the table. Show your work. (c) In order for a citizen of Kona to maintain the same standard of living between 20102010 and 20152015, what percentage change in nominal income would be needed? Explain.
The nation of Kona cultivates coffee beans and cassava, from which all their consumer goods are produced. (a) Calculate the cost of the market basket of goods in the table in 20102010 and in 20152015. Show your work. (b) Use 20102010 as the base year to calculate the price indices for 20102010 and 20152015 for the market basket of goods in the table. Show your work. (c) In order for a citizen of Kona to maintain the same standard of living between 20102010 and 20152015, what percentage change in nominal income would be needed? Explain.
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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The nation of Kona cultivates coffee beans and cassava, from which all their consumer goods are produced.
(a) Calculate the cost of the market basket of goods in the table in 20102010 and in 20152015. Show your work.
(b) Use 20102010 as the base year to calculate the price indices for 20102010 and 20152015 for the market basket of goods in the table. Show your work.
(c) In order for a citizen of Kona to maintain the same standard of living between 20102010 and 20152015, what percentage change in nominal income would be needed? Explain.
Transcribed Image Text:Product
Mocha coffee
Sweet pudding
Cassava leaf salad
Market Basket of Goods
100 cups
50 quarts
25 packages
2010
$2.00 per cup
$1.50 per quart
$1.00 per package
Prices
2015
$2.50 per cup
$2.20 per quart
$1.20 per package
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