Suppose the price of a quart of milk rises from $1.00 to $1.20 and the price of a T-shirt rises from $8.00 to $9.60. If the CPI rises from 150 to 195, then people likely will buy (Note that this is not a two goods economy anymore) a.more milk and more T-shirts. b.more milk and fewer T-shirts. c.less milk and more T-shirts. d.less milk and fewer T-shirts.
Suppose the
a.more milk and more T-shirts.
b.more milk and fewer T-shirts.
c.less milk and more T-shirts.
d.less milk and fewer T-shirts.
Suppose the price of a gallon of ice cream rises from $4 to $5 and the price of a can of coffee rises from $2 to $2.50. If the CPI rises from 150 to 177, then people likely will buy
a.more ice cream and more coffee.
b.more ice cream and less coffee.
c.less ice cream and more coffee.
d less ice cream and less coffee.
Can you please explain how we got answer a for the first question and d for the second one. Thank you.
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