Problem Set 2: Consumer Price Index Suppose that people consume only three goods, as shown in this table: Tennis BallsGolf BallsBottles of Pepsi Cola2017 price€ 3€ 5€ 12017 quantity1001002002018 price€ 3€ 6€ 22018 quantity100100200 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 priceIf 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?

The percentage change can be calculated by:

Principles of Macroeconomics (MindTap Course List)

7th Edition

ISBN:9781285165912

Author:N. Gregory Mankiw

Publisher:N. Gregory Mankiw

Chapter11: Measuring The Cost Of Living

Section: Chapter Questions

Problem 3PA

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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?

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