3. Suppose that people consume only three goods, as shown in this table: 2014 price 2014 quantity 2015 price 2015 quantity Tennis Balls Golf Balls $4 100 $6 100 $2 100 $2 100 Bottles of Gatorade $1 200 $2 200 a. What is the percentage change in the price of each of the three goods? b. Using a method similar to the consumer price index, compute the percentage change in the overall price level. c. If you were to learn that a bottle of Gatorade increased in size from 2014 to 2015, should that information affect your calculation of the inflation rate? If so, how?

3. Suppose that people consume only three goods, as shown in this table: 2014 price 2014 quantity 2015 price 2015 quantity Tennis Balls Golf Balls $4 100 $6 100 $2 100 $2 100 Bottles of Gatorade $1 200 $2 200 a. What is the percentage change in the price of each of the three goods? b. Using a method similar to the consumer price index, compute the percentage change in the overall price level. c. If you were to learn that a bottle of Gatorade increased in size from 2014 to 2015, should that information affect your calculation of the inflation rate? If so, how?

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Question

3. Suppose that people consume only three goods, as
shown in this table:
2014 price
2014 quantity
2015 price
2015 quantity
Tennis Balls Golf Balls
$4
100
$6
100
$2
100
$2
100
Bottles of
Gatorade
$1
200
$2
200
a. What is the percentage change in the price of each
of the three goods?
b. Using a method similar to the consumer price
index, compute the percentage change in the
overall price level.
c. If you were to learn that a bottle of Gatorade
increased in size from 2014 to 2015, should that
information affect your calculation of the inflation
rate? If so, how?
d. If you were to learn that Gatorade introduced new
flavors in 2015, should that information affect your
calculation of the inflation rate? If so, how?

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