. A small nation idolizes the TV show The Voice. Allthey produce and consume are karaoke machinesand CDs, in the following amounts:Karaoke Machines CDsQuantity Price Quantity Price2020 10 $40 30 $102021 12 60 50 12a. Using a method similar to the CPI, computethe percentage change in the overall price level.Use 2020 as the base year and fix the basket at1 karaoke machine and 3 CDs.b. Using a method similar to the GDP deflator,compute the percentage change in the overallprice level. Again, use 2020 as the base year.c. Is the inflation rate in 2021 the same using the twomethods? Explain why or why not.

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Q: a b c

A:

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Price Index Analysis

A price index is used to measure inflation in most countries and is focused on a collection of products and services significant to a particular economic segment. It is a measure of changing prices over some time. The price index is a scale or a valuable device to measure changes in price levels. The economists randomly choose a certain year as the base year to convert the amount spent on a basket into a price index.