Suppose that people consume only three goods as shown in this table:
Tennis ball
Golf ball
Bottles of Gatorade
2011
Price
$2
$4
$1
Quantity
100
100
200
2012
Price
$2
$6
$2
Quantity
100
100
200
1. What is the percentage change in the price of each of the three goods?
2. Using a method similar to the consumer price index, compute the percentage change in the overall price level.
3. If you were to learn that a bottle of Gatorade increased in size from 2011 to 2012, should that information affect your calculation of the inflation rate? If so, how?
4. If you were to learn that Gatorade introduced new flavours in 2012, should that information affect your calculation of the inflation rate? If so, how?
Suppose that people consume only three goods as shown in this table:
|
|
Tennis ball |
Golf ball |
Bottles of Gatorade |
|
|
2011 |
Price |
$2 |
$4 |
$1 |
|
Quantity |
100 |
100 |
200 |
|
|
2012 |
Price |
$2 |
$6 |
$2 |
|
Quantity |
100 |
100 |
200 |
|
1. What is the percentage change in the price of each of the three goods?
2. Using a method similar to the consumer price index, compute the percentage change in the overall price level.
3. If you were to learn that a bottle of Gatorade increased in size from 2011 to 2012, should that information affect your calculation of the inflation rate? If so, how?
4. If you were to learn that Gatorade introduced new flavours in 2012, should that information affect your calculation of the inflation rate? If so, how?
Related textbook solutions
Related questions
Suppose that people consume only three goods, as shown in this table:
| Year | Tennis Balls | Golf Balls | Bottle of Gatorade | |
| Price | 2020 | $2 | $4 | $1 |
| Quantity | 2020 | 100 | 100 | 200 |
| Price | 2021 | $2 | $6 | $2 |
| Quantity | 2021 | 100 | 100 | 200 |
Compute the percentage change in price for each of the three goods.
Using a method similar to that used to calculate the consumer price index, the percentage change in the overall price level is __________.
|
Base Year (2006) 2013 |
|||
|
Product |
Quantity |
Price |
Price |
|
Cokes |
100 |
$0.50 |
$0.75 |
|
Hamburgers |
200 |
2.00 |
2.50 |
|
CDs |
10 |
20.00 |
21.00 |
1) Refer to the table above. Assume the market basket for the consumer price index has three products: Cokes, hamburgers, and CDs.
The consumer price index for 2013 equals ______.
|
Product |
Quantity |
Base Year Price (2001) |
Price (2012) |
Price (2013) |
|
Burritos |
10 |
$1.00 |
$1.50 |
$1.75 |
|
Flashlights |
15 |
5.00 |
7.00 |
6.75 |
|
Golf balls |
8 |
2.00 |
3.00 |
3.50 |
2) Refer to the table above. Consider a simple economy that produces only three products: burritos, flashlights, and golf balls. Use the information in the table to calculate the inflation rate for 2013 (vs. 2012), as measured by the consumer price index.
|
Year |
Nominal Average Hourly Earnings |
CPI |
|
2011 |
$10 |
100 |
|
2012 |
10 |
105 |
|
2013 |
12 |
110 |
3) Refer to the table above. Real average hourly earnings were equal to ________ in 2012.
4) Looking at the table above, real average hourly earnings between 2012 and 2013 changed by ______%.
5) Matt's real wage in 2014 is $26.80. If the price level is 104, what is Matt's nominal wage?
