Chapter 13, Problem 11P

To determine

To determine: The percent change in production of goods in given periods of time.

Concept Introduction:

Gross Domestic Product (GDP): It refers to the gross money value or gross market value of all finished goods and services produced by resident and non-resident people of the country that is within the borders of that particular country in an accounting year.

Inflation rate: The overall increase in CPI, which is the weighted average of prices of all the goods and services, is known as inflation rate.

Formula to calculate inflation rate is:

Explanation of Solution

a. Percentage change in production.

Percentage change in the production of computer:

Year	Price of Computer($)(A)	Quantity of Computer(B)	Total Production($)(C)	Old Production($)(D)	Change in Production($)(E)	Percentage Change in Production(%)
2012	900	10	9,000	-	-	-
2013	1,000	10.5	10,500	9,000	1,500	16.7
2014	1,050	12	1,2600	10,500	2,100	20

Percentage change in production of DVDs:

Year	Price of DVDs($)(A)	Quantity of DVDs(B)	Total Production($)(C)	Old Production($)(D)	Change in Production($)(E)	Percentage Change in Production(%)
2012	10	100	1,000	-	-	-
2013	12	105	1,260	1,000	260	26
2014	14	110	1,540	1,260	280	22.2

Percentage change in production of pizzas:

Year	Price of DVDs($)(A)	Quantity of DVDs(B)	Total Production($)(C)	Old Production($)(D)	Change in Production($)(E)	Percentage Change in Production(%)
2012	15	2	30	-	-	-
2013	16	2	32	30	2	6.7
2014	17	3	51	32	19	59.4

Conclusion:

Thus, percentage change in the production of computer, DVDs and pizzas is calculated above.

b. Percentage change in prices.

Percentage change in price of computer:

Year	Price of Computer($)(A)	Old Price($)(B)	Change in Price($)(C)	Percentage Change in Price(%)
2012	900	-	-	-
2013	1,000	900	100	11.1
2014	1,050	1,000	50	5

Percentage change in price of DVDs:

Year	Price of DVDs($)(A)	Old Price($)(B)	Change in Price($)(C)	Percentage Change in Price(%)
2012	10	-	-
2013	12	10	2	20
2014	14	12	2	16.7

Percentage change in price of Pizza:

Year	Price of Pizza($)(A)	Old Price($)(B)	Change in Price($)(C)	Percentage Change in Price(%)
2012	15	-	-
2013	16	15	1	6.7
2014	17	16	1	6.25

Conclusion:

Thus, percentage change in price of computer, DVDs and pizzas is calculated above.

c. Nominal GDP.

Total production of computer, DVDs and pizzas is calculated in part a.

Nominal GDP:

Year	Total Production of Computer($)(A)	Total Production of DVDs($)(B)	Total Production of Pizzas($)(C)	Nominal GDP($)
2012	9,000	1,000	30	10,030
2013	10,500	1,260	32	11,792
2014	1,2600	1,540	51	14,191

Percentage change in Nominal GDP:

Year	Nominal GDP($)(A)	Old GDP($)(B)	Change in GDP($)(C)	Percentage Change in Nominal GDP(%)
2012	10,030	-	-	-
2013	11,792	10,030	1,762	17.6
2014	14,191	11,792	2,399	20.34

Conclusion:

Thus, nominal GDP and percentage change in nominal GDP is calculated above.

d. Real GDP.

Formula to calculate total production at the 2012 price is:

Real GDP:

Year	Total Production of Computer($)(A)	Total Production of DVDs($)(B)	Total Production of Pizzas($)(C)	Real GDP($)
2012	9,000	1,000	30	10,030
2013	9,450	1,050	30	10,530
2014	10,800	1,100	45	11,945

Percentage change in real GDP:

Year	Real GDP($)(A)	Old GDP($)(B)	Change in GDP($)(C)	Percentage Change in Real GDP(%)
2012	10,030	-	-	-
2013	10,530	10,030	500	4.99
2014	11,945	10,530	1,415	13.44

Conclusion:

Thus, real GDP and percentage change in real GDP is calculated above.