In Happy Claptown, there are only 3 goods: Burgers, Patties, and Pizza. The following table shows the prices and quantities produced of these goods in 1990, 2000, and 2010: 199019902000200020102010 PriceQuantityPriceQuantityPriceQuantityBurgers2.005001.006001.10690Patties7.0030010.0020010.50110Pizza0.703004.002000.75420 a) A "market bundle" for a typical family is deemed to be 5 burgers, 3 patties, and 4 pizzas. Compute the consumer price index (CPI) for each of the three years, using 1990 as the base year. b) What was the rate of inflation from 1990 to 2000, using the CPI you calculated in (a)?

Formula for CPI is: CPI =Cost of market bundle in current yearCost of market bundle in Base year×100…

Answered: In Happy Claptown, there are only 3…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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In Happy Claptown, there are only 3 goods: Burgers, Patties, and Pizza. The following table shows the prices and quantities produced of these goods in 1990, 2000, and 2010:

	1990	1990	2000	2000	2010	2010
	Price	Quantity	Price	Quantity	Price	Quantity
Burgers	2.00	500	1.00	600	1.10	690
Patties	7.00	300	10.00	200	10.50	110
Pizza	0.70	300	4.00	200	0.75	420

a) A "market bundle" for a typical family is deemed to be 5 burgers, 3 patties, and 4 pizzas. Compute the consumer price index (CPI) for each of the three years, using 1990 as the base year.
b) What was the rate of inflation from 1990 to 2000, using the CPI you calculated in (a)?

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