Question 1 Suppose that bushfires in North-West Victoria destroys many of the citrus farms. As a result, the price of oranges rises from $0.40 to $0.80, the price of a tangelo rises from $1.20 to $2.00, and the price of limes rises from $0.50 to $0.90. Suppose the citrus market basket is composed of 100 oranges, 50 tangelos and 200 limes. Therefore, there has been an 80% increase in citrus price index and the average citrus consumer's cost of living has also increased by this amount. TRUE or FALSE (explain your answer showing appropriate calculations).

Question 1 Suppose that bushfires in North-West Victoria destroys many of the citrus farms. As a result, the price of oranges rises from $0.40 to $0.80, the price of a tangelo rises from $1.20 to $2.00, and the price of limes rises from $0.50 to $0.90. Suppose the citrus market basket is composed of 100 oranges, 50 tangelos and 200 limes. Therefore, there has been an 80% increase in citrus price index and the average citrus consumer's cost of living has also increased by this amount. TRUE or FALSE (explain your answer showing appropriate calculations).

Essentials of Economics (MindTap Course List)

8th Edition

ISBN:9781337091992

Author:N. Gregory Mankiw

Publisher:N. Gregory Mankiw

Chapter7: Consumers, Producers, And The Efficiency Of Markets

Section: Chapter Questions

Problem 11PA

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