Essentials of Economics
Essentials of Economics
4th Edition
ISBN: 9781464186653
Author: Paul Krugman, Robin Wells
Publisher: Worth Publishers
Question
Book Icon
Chapter 13, Problem 11P
To determine

To determine: The percent change in production of goods in given periods of time.

Concept Introduction:

Gross Domestic Product (GDP): It refers to the gross money value or gross market value of all finished goods and services produced by resident and non-resident people of the country that is within the borders of that particular country in an accounting year.

Inflation rate: The overall increase in CPI, which is the weighted average of prices of all the goods and services, is known as inflation rate.

Formula to calculate inflation rate is:

    Essentials of Economics, Chapter 13, Problem 11P , additional homework tip  1

Expert Solution & Answer
Check Mark

Explanation of Solution

a. Percentage change in production.

Percentage change in the production of computer:

    YearPrice of Computer($)(A)Quantity of Computer(B)Total Production($)(C)Essentials of Economics, Chapter 13, Problem 11P , additional homework tip  2Old Production($)(D)Change in Production($)(E)Essentials of Economics, Chapter 13, Problem 11P , additional homework tip  3Percentage Change in Production(%)Essentials of Economics, Chapter 13, Problem 11P , additional homework tip  4
    2012 900 10 9,000 - - -
    2013 1,000 10.5 10,500 9,000 1,500 16.7
    2014 1,050 12 1,2600 10,500 2,100 20

Percentage change in production of DVDs:

    YearPrice of DVDs($)(A)Quantity of DVDs(B)Total Production($)(C)Essentials of Economics, Chapter 13, Problem 11P , additional homework tip  5Old Production($)(D)Change in Production($)(E)Essentials of Economics, Chapter 13, Problem 11P , additional homework tip  6Percentage Change in Production(%)Essentials of Economics, Chapter 13, Problem 11P , additional homework tip  7
    2012 10 100 1,000 - - -
    2013 12 105 1,260 1,000 260 26
    2014 14 110 1,540 1,260 280 22.2

Percentage change in production of pizzas:

    YearPrice of DVDs($)(A)Quantity of DVDs(B)Total Production($)(C)Essentials of Economics, Chapter 13, Problem 11P , additional homework tip  8Old Production($)(D)Change in Production($)(E)Essentials of Economics, Chapter 13, Problem 11P , additional homework tip  9Percentage Change in Production(%)Essentials of Economics, Chapter 13, Problem 11P , additional homework tip  10
    2012 15 2 30 - - -
    2013 16 2 32 30 2 6.7
    2014 17 3 51 32 19 59.4

Conclusion:

Thus, percentage change in the production of computer, DVDs and pizzas is calculated above.

b. Percentage change in prices.

Percentage change in price of computer:

    YearPrice of Computer($)(A)Old Price($)(B)Change in Price($)(C)Essentials of Economics, Chapter 13, Problem 11P , additional homework tip  11Percentage Change in Price(%)Essentials of Economics, Chapter 13, Problem 11P , additional homework tip  12
    2012 900 - - -
    2013 1,000 900 100 11.1
    2014 1,050 1,000 50 5

Percentage change in price of DVDs:

    YearPrice of DVDs($)(A)Old Price($)(B)Change in Price($)(C)Essentials of Economics, Chapter 13, Problem 11P , additional homework tip  13Percentage Change in Price(%)Essentials of Economics, Chapter 13, Problem 11P , additional homework tip  14
    2012 10 - -
    2013 12 10 2 20
    2014 14 12 2 16.7

Percentage change in price of Pizza:

    YearPrice of Pizza($)(A)Old Price($)(B)Change in Price($)(C)Essentials of Economics, Chapter 13, Problem 11P , additional homework tip  15Percentage Change in Price(%)Essentials of Economics, Chapter 13, Problem 11P , additional homework tip  16
    2012 15 - -
    2013 16 15 1 6.7
    2014 17 16 1 6.25

Conclusion:

Thus, percentage change in price of computer, DVDs and pizzas is calculated above.

c. Nominal GDP.

Total production of computer, DVDs and pizzas is calculated in part a.

Nominal GDP:

    YearTotal Production of Computer($)(A)Total Production of DVDs($)(B)Total Production of Pizzas($)(C)Nominal GDP($)Essentials of Economics, Chapter 13, Problem 11P , additional homework tip  17
    2012 9,000 1,000 30 10,030
    2013 10,500 1,260 32 11,792
    2014 1,2600 1,540 51 14,191

Percentage change in Nominal GDP:

    YearNominal GDP($)(A)Old GDP($)(B)Change in GDP($)(C)Essentials of Economics, Chapter 13, Problem 11P , additional homework tip  18Percentage Change in Nominal GDP(%)Essentials of Economics, Chapter 13, Problem 11P , additional homework tip  19
    2012 10,030 - - -
    2013 11,792 10,030 1,762 17.6
    2014 14,191 11,792 2,399 20.34

Conclusion:

Thus, nominal GDP and percentage change in nominal GDP is calculated above.

d. Real GDP.

Formula to calculate total production at the 2012 price is:

Essentials of Economics, Chapter 13, Problem 11P , additional homework tip  20

Real GDP:

    YearTotal Production of Computer($)(A)Total Production of DVDs($)(B)Total Production of Pizzas($)(C)Real GDP($)Essentials of Economics, Chapter 13, Problem 11P , additional homework tip  21
    2012 9,000 1,000 30 10,030
    2013 9,450 1,050 30 10,530
    2014 10,800 1,100 45 11,945

Percentage change in real GDP:

    YearReal GDP($)(A)Old GDP($)(B)Change in GDP($)(C)Essentials of Economics, Chapter 13, Problem 11P , additional homework tip  22Percentage Change in Real GDP(%)Essentials of Economics, Chapter 13, Problem 11P , additional homework tip  23
    2012 10,030 - - -
    2013 10,530 10,030 500 4.99
    2014 11,945 10,530 1,415 13.44

Conclusion:

Thus, real GDP and percentage change in real GDP is calculated above.

Want to see more full solutions like this?

Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!
Knowledge Booster
Background pattern image
Recommended textbooks for you
Text book image
ENGR.ECONOMIC ANALYSIS
Economics
ISBN:9780190931919
Author:NEWNAN
Publisher:Oxford University Press
Text book image
Principles of Economics (12th Edition)
Economics
ISBN:9780134078779
Author:Karl E. Case, Ray C. Fair, Sharon E. Oster
Publisher:PEARSON
Text book image
Engineering Economy (17th Edition)
Economics
ISBN:9780134870069
Author:William G. Sullivan, Elin M. Wicks, C. Patrick Koelling
Publisher:PEARSON
Text book image
Principles of Economics (MindTap Course List)
Economics
ISBN:9781305585126
Author:N. Gregory Mankiw
Publisher:Cengage Learning
Text book image
Managerial Economics: A Problem Solving Approach
Economics
ISBN:9781337106665
Author:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor
Publisher:Cengage Learning
Text book image
Managerial Economics & Business Strategy (Mcgraw-...
Economics
ISBN:9781259290619
Author:Michael Baye, Jeff Prince
Publisher:McGraw-Hill Education