Q3. Suppose that people consume only three goods, as shown in this table: Tennis Balls Golf Balls 100 Plus 2006 price RM2 RM4 RM1 2006 quantity 100 100 200 2007 price RM2 RM6 RM2 2007 quantity 100 100 200 a. What is the percentage change in the price of each of the three goods? b. Using a method that similar to the consumer price index, compute the percentage change in the overal price level.
Q3. Suppose that people consume only three goods, as shown in this table: Tennis Balls Golf Balls 100 Plus 2006 price RM2 RM4 RM1 2006 quantity 100 100 200 2007 price RM2 RM6 RM2 2007 quantity 100 100 200 a. What is the percentage change in the price of each of the three goods? b. Using a method that similar to the consumer price index, compute the percentage change in the overal price level.
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
Related questions
Question
Please answer question 3 a and b by steps

Transcribed Image Text:Chapter 5: Measuring The Cost Of Living
Problems And Applications
Q1. Suppose that the residents of Vegopia spend all of their income on long beans, bean
sprouts, and carrots. In 2006, they buy 100 strands of long beans for RM200, 50kilos of
beans sprouts for RM75, and 500 carrots for RM50, In 2007, they buy 75 strands of long
GROUP 5, 6 & 7
beans for RM225, 80 kilos of beans sprouts for RM120, and 500 carrotsfor RM100.
a. Calaulate the price of each vegetable in each year.
b. Using 2006 as the base year, calculate the CPI for each year,
c. What is the inflation rate in 2007?
Q3. Suppose that people consume only three goods, as shown in this table:
Tennis Balls
Golf Balls
100 Plus
2006 price
RM2
RM4
RM1
2006 quantity
100
100
200
2007 price
RM2
RM6
RM2
2007 quantity
GROUP 3, 2 & 8
100
100
200
a. What is the percentage change in the price of each of the three goods?
b. Using a method that 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 100 Plus increased in size from 2006 and 2007,
should that information affect your calculation of the inflation rate? If so, how?
GROUP 1, 4 & 9
d. If you were to learn that a bottle of 100 Plus introduced new flavors in 2007, should
that information affect your calaulation of the inflation rate? If so, how?
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