Suppose manufacturers introduce a new model car to replace a car currently included in the CPI basket. The price of the new car is 10 percent higher than the discontinued model, but the new car also includes additional safety features. In this situation the CPI will tend to inflation as a result of bias. A understate; substitution B. overstate; substitution C. overstate; quality adjustment. D. understate; quality adjustment
Q: Use the midpoint formula to calculate the price elasticity of suboty between point A and point for…
A: The price elasticity of supply is calculated as the percentage change in quantity supplied divided…
Q: Refer to the figure below. What are the monopolist's profits? Price 30 20 10 200 MR 400 D MC=AC…
A: In a monopoly market structure, There exists a single seller. There exists high barriers to entry…
Q: ased on our class lessons and your understanding of Chapter 5; the Hirfindahl Hirshman Index (HHI)…
A: The Herfindahl-Hirschman Index (HHI), which measures market concentration, is frequently used before…
Q: Required information Assume that 25 years ago your dad invested $320,000, plus $32,000 in years 2…
A: Future value means the value of an asset or investment at a specified future date, assuming a…
Q: "Marx started from the proposition that capitalists aim to accumulate ever-increasing wealth by…
A: Karl Marx's theory of surplus value is a central concept in his critique of political economy and…
Q: Macmillan Learning Classify the statements about growth as true or false. If a statement is an…
A: Growth is defined as the increase in national production of goods and services. Growth is calculated…
Q: If there is persistent inflation Select one: a. long-run aggregate supply is constant. b. there is…
A: The rate at which the general level of prices for goods and services in an economy rises, leading to…
Q: Figure 15-3 P4 P3 P2 P1 PO Price 0002 03 04 Curve C Curve B Curve D Curve A Quantity Refer to Figure…
A: The marginal cost curve reflects the additional cost incurred by the firm for producing one more…
Q: Suppose that when the price of gasoline is $3.50 per gallon, the total amount of gasoline purchased…
A: The Mid point formula is used to calculate the elasticity of demand. It helps to avoid the problem…
Q: In which of the following instances is the effect on equilibrium price dependent on the magnitude of…
A: Equilibrium refers to a scenario at which the quantity demanded of a goods or services is equal to…
Q: James and John both consume only poutine and pizza. Both of them always choose to have some poutine…
A: The Marginal Rate of Substitution (MRS) is an economic concept that represents the rate at which a…
Q: Consider the following EOY cash flows for two mutually exclusive alternatives (one must be chosen).…
A: The project information is given below:For present worth analysis, study period (n)=18 years and…
Q: Suppose that consumer spending initially rises by $5 billion for every 1 percent rise in household…
A: Aggregate demand is the overall spending made by the consumers in an economy on a diversified goods…
Q: The following question has three parts. Part I. Consider two firms each producing a version of a…
A: There are two firms in the economy : 1 & 2Demand function : pi = a - bqi - dqj a = 84 , b…
Q: On the following graph, plot Sean's demand for scented candles using the green points (triangle…
A: Demand refers to the quantity that a consumer wishes to buy at a given price in given period of time
Q: Please the answer correct please ASAP Don't answer by pen paper please. he…
A: Capital allude to whatever has value or can be utilized to produce more value. It tends to be…
Q: The following graph shows the market for microwavable ramen noodles. Pramen O Price increase,…
A: Market equilibrium: At the market equilibrium demand equals supply. Or at market the equilibrium…
Q: Assume the economy operates in the intermediate range of aggregate supply curve. Using the AS/AD…
A: AD:The entire amount of products and services that all people, households, enterprises, and…
Q: The leader of a federal political party made the following campaign promise: "My administration will…
A: Economic analysis refers to the systematic approach used to examine the principles, factors, and…
Q: If firms can easily enter and exit a market, then A. firms will earn zero economic profit in the…
A: Perfect competition is an economic market structure characterized by a multitude of firms producing…
Q: Other things the same, an increase in the price level makes the dollars people hold worth? a. more,…
A: Lets analyze the question.
Q: Refer to the table below. If the information pertains to the demand curve and the long run average…
A: Demand refers to the quantity that a consumer wishes to by at a given price in given periofd of…
Q: The accompanying table shows Francesca's estimated annual benefits of holding different amounts of…
A: The marginal cost is the change in the total cost that arises when the quantity produced is…
Q: Consider the equations and graphs for the demand and supply functions given below, then answer the…
A: “Since you have posted a question with multiple sub parts, we will provide the solution only to the…
Q: Using the following national income accounting data, compute (a) GDP, (b) NDP, and (c) NI. All…
A: Gross domestic product (GDP) will be computed as total market value of all the finished items and…
Q: 5. Graph the investment function. Graph the aggregate spending function (no government, no foreign…
A: The aggregate spending curve or aggregate expenditure curve refers to the curve depicting the…
Q: How did you come about these rates/Values: 14.29;24.4;17.49;12.49;8.93; 8.92;8.93 ??
A: The issue is associated with the areas of asset depreciation and financial computations in the field…
Q: Which of the following would increase gross private domestic investment in an economy? Select one:…
A: The four components of GDP include the business investment, personal consumption, government…
Q: The following graph shows the market for loanable funds in a closed economy. The upward-sloping…
A: Demand curve is a downward sloping curve. Supply curve is the upward sloping curve. Equilibrium is…
Q: The MRS of Good Y at Point A on IC₂ is: Good X 10 9 8 A - + B-- IC₁ IC₂
A: An indifference curve is a graphical representation in economics that shows different combinations…
Q: Consider the equations and graphs for the demand and supply functions given below, then answer the…
A: “Since you have posted a question with multiple sub parts, we will provide the solution only to the…
Q: d. In the table below, complete the short-run supply schedule for the firm (columns 1 and 2) and…
A: The issue you raised is related to microeconomics, particularly in the context of perfect…
Q: The graph to the right shows the distribution of outcomes for two investment opportunities;…
A: n economics, payoffs refer to the outcomes or rewards that individuals or parties receive as a…
Q: in the month of January a car dealership bought its vehicles for $100,000 and sold them for $145,000…
A: The profit a firm makes from its main business operations is measured in terms of gross profit,…
Q: Suppose Hong Kong's money supply data as at 31 Dec 2016 and 31 Dec 2017 were as follows: Total legal…
A: M1: Includes cash (coins, paper money) and demand deposits (checking accounts) - the most liquid…
Q: Refer to the figure below. If the government sets a price ceiling of $6, 18 16 14 12 10 98 6 4 2 $₁…
A: Price ceiling refers to the maximum legal price that can be charged for a good. An effective price…
Q: If the demand for a product is perfectly elastic, a tax of $1 per unit imposed on sellers will a.…
A: This can be defined as the concept that shows the revenue of the government of that nation by which…
Q: If a technology company introduces a new gadget to the market which creates long lines of eager…
A: Demand refers to the quantity of a goods or service that a consumer is willing and able to buy at a…
Q: 7. Refer to Figure 2.1.2. The price of coffee is currently $6.00. and quantity demanded is 7 million…
A: Shift in the demand curve: When the demand for the good changes due all factors other than price,…
Q: Which methods do economists employ in order to calculate the market value of all final goods and…
A: Economists are professionals who study and analyze economic systems, behavior, and phenomena. They…
Q: C. At a product price of $32 (i) Will this firm produce in the short run? (Click to select) (ii) If…
A: A purely competitive producer operates in a market where many firms are selling identical products,…
Q: *4. Consider the production function: Y = AK0.310.7 a) Show the production function has the property…
A: ***Since the student has posted a question with multiple subparts, the expert is required to solve…
Q: Complete the first row of the following table. Pricing Mechanism Profit Maximization Marginal-Cost…
A: Monopoly:Monopoly is a market where there is one seller and many buyers. Seller sells the product at…
Q: 9. Ignoring oligopoly and focusing on the other three types of market structure, in which of those…
A: Market refers to a place at which the buyer and seller of a goods or service comes in contact to…
Q: The maximum value a correlation coefficient (r) can take is , the minimum value r can take is .A…
A: The correlation coefficient (r) measures the magnitude of the linear relationship between the 2…
Q: 3. A rough measure of the degree of economic interdependence of a nation is given by:
A: Economic interdependence refers to the mutual dependence of different countries on each other,…
Q: 8. Links between factor markets The following scenario examines markets for factors of production,…
A: Land and labour are crucial production inputs. Depending on market variables such as supply and…
Q: If the monopoly firm's marginal cost curve is either horizontal or upward sloping, it follows that…
A: The Marginal cost (MC) refers to the change in the total cost when one additional unit of good is…
Q: Question 51 Economists believe economic growth is spurred by firm investment. What are the ways by…
A: Economic growth refers to increase in output like GDP in over period of time.It shows increase in…
Q: The following graph shows the domestic supply of and demand for wheat in New Zealand. The world…
A: When country open for trade, it means it allows products of other countries to enter to its domestic…
Trending now
This is a popular solution!
Step by step
Solved in 4 steps
- Question 17 One problem with the CPI is the "substitution bias," which refers to consumers buying more of a good that has become cheaper and less of a good that has become more expensive. Assume that consumers consider Pepsi and Coke to be substitutes, so that when the price of Coke increases, consumers purchase less Coke and more Pepsi. When the CPI is calculated following the increase in the price of Coke, the substitution bias causes the CPI to O understate inflation since both the increase in the price of Coke and the increase in the amount of Pepsi purchased enter the CPI calculation O understate inflation since only the decrease in the price of Pepsi enters the CPI calculation O overstate inflation since both the increase in the price of Coke and the decrease in amount of Coke purchased enter the CPI calculation overstate inflation since only the increase in the price of Coke enters the CPI calculationIf there is an increase in the price of bananas that causes consumers to purchase fewer pounds of bananas and more pounds of grapes, the CPI will suffer from a. substitution bias b. bias due to the introduction of new goods Ocbias due to unmeasured quality change d. base-year bias e none of the answer choicesWhat is the effect of the sources of bias on the CPI calculation? A. Changes in relative prices lead consumers to change the items they buy, and the CPI reflects this substitution. B. The new goods bias injects a downward bias into the CPI. C. When faced with higher prices, people use discount stores more frequently and convenience stores less frequently, but the CPI doesn't include this outlet substitution. D. When the quality of a good improves over time, the CPI doesn't include the portion of the price rise attributable to the higher quality in its calculation.
- The following graph shows the approximate value of the U.s. Consumer Price Index (CPI) from September 2004 through November 2005. CPI Sep 2004–Nov 2005 I(t) 202 200 198 196 194 192 190 + 188 →t 14 4 8 10 12 Sep-04 Jan-05 Nov-05 The approximating curve shown on the figure is given by I(t) = -0.005t³ + 0.12t2 – 0.01t + 190 (0 sts 14), where t is time in months since the start of September 2004. (a) Use the model to estimate the monthly inflation rate in January 2005 (t = 4). Recall that the inflation rate is I'(t) (Round your answer to three decimal places.) I(t) % (b) Was inflation slowing or speeding up in January 2005? O slowing down O speeding up (c) When was inflation speeding up? When was inflation slowing? (Use the model to determine this.) Inflation was speeding up prior to --Select--- v 2005 and slowing after --Select--- v 2005.Insurance and pensions 11.9% Item a. Entertainment b. Transportation c. Clothing Housing 32.8% Entertainment 5.3% Source: U.S. Bureau of Labor Statistics, Consumer Expenditure Survey (2018 data). 0.053 0.159 0.03 Transportation 15.9% Health care 8.1% Use the item weights in the figure to determine the percentage change in the CPI that would result from a(n) a. 20 percent increase in entertainment prices. b. 8 percent decrease in transportation costs. c. doubling of clothing prices. (Note: Review the table titled "Computing Changes in the CPI" in your text for assistance.) Instructions: Enter your responses as a percentage rounded to two decimal places. If you are entering any negative numbers be sure to include a negative sign (-) in front of those numbers. Item Weight Price Change (Inflation Effect) Impact on CPI 20% -8% 100% Food 12.9% Clothing 3.0% Miscellaneous 10.1%Why is the PCE deflator a preferred measure of consumer prices over the CPI? O the PCE data is released monthly while the CPI data are quarterly the PCE also is subject to substitution bias, but it does not include new goods O It is not a fixed basket, so it does not have the substitution bias present in the CPI O It is a fixed basket of goods whereas the CPI is not a fixed basket
- WPS Office TUTO10.pdf + WAN NU.. O Go Premium = Menu v Home Insert Comment Edit Page Protect Tools K 3. Shipments of product from manufacturer to the retailer are tracked by the U.S. Census Bureau. The value of shipments for computer and electronic products in September 1 B 3E 2009, 2010 and 2011 are shown in the table below, along with the CPI and PPI for each of these months. Manufacturer Shipments ($ billion) CPI PPI 2009 29.1 216.0 173.4 218.4 226.3 2010 33.3 180.2 2011 32.9 192.5 a) Use the CPI to deflate the value of the shipped computer and electronics products. b) Use the PPI to deflate the value of the shipped computer and electronics products. c) Which index, the CPI or PPI, do you feel is more appropriate for deflating these shipment values? Why? 2/2 BO 00 110% - 11:17 PM O 4) G 27/1/2021 证 匈 近How does commodity subsitution bias influence the CPI? The CPI ____ consumer subisuttions between goods, so when the price of carrots rises and consumers switch to broccoi, the CPI ____ the rise in the price of vegetables. A. ignores; overstates B. incorporates; correctly measures C. ignores; correctly measures D. incorporates; overstatesRefer to the figure below. Insurance and pensions 11.9% Item a. Entertainment b. Transportation c. Clothing Housing 32.8% Source: U.S. Bureau of Labor Statistics, Consumer Expenditure Survey (2018 date). Entertainment 5,3% Item Weight 0.053 0.159 0.03 Transportation 15.9% Health care 8.1% Use the item weights in the figure to determine the percentage change in the CPI that would result from a(n) a. 20 percent increase in entertainment prices. b. 8 percent decrease in transportation costs. c. doubling of clothing prices. (Note: Review the table titled "Computing Changes in the CPI" in your text for assistance.) Instructions: Enter your responses as a percentage rounded to two decimal places. If you are entering any negative numbers be sure to include a negative sign (-) in front of those numbers. Price Change 20% -8% 100% Food 12.9% Clothing 3.0% Impact on CPI (Inflation Effect) Miscellaneous 10.1%
- 1) Which of the following is FALSE regarding PPI?a. Stands for Producer Price Indexb. In manufacturing, measures the rate of change in prices of products sold as they leave the producerc. Measures the cost of the goods and services bought by firmsd. Measures the cost of the goods and services bought by a typical consumer2) CPI is measured using the ----------------- :a. overall productsb. overall cost of the goods and servicesc. overall cost of oild. none of the aboveCommodity substitution bias _______ when the CPI is calculated in 2021 using the 2020 market basket because _______. A. exists; over time preferences change and people prefer to eat pizza rather than pasta B. does not exist; pizza and pasta are not substitutes C. exists; people switch from the relatively more expensive pasta to the relatively less expensive pizza D. does not exist; the CPI market basket is updated frequently to eliminate substitution biasHow does commodity subsitution bias influence the CPI? The CPI ____ consumer subsitutions between goods, so when the price of carrots rises and consumers switch to broccoli, the CPI ____ the rise in the price of vegetables. A. ignores; overstates B. incorporates; correctly measures C. ignores; correctly measures D. incorporates; overstates
