Chapter 15, Problem 6MCQ

To determine

The question requires us to define the market basket.

Explanation of Solution

Economists monitor changes in the cost of a typical customer's consumption bundle, or a typical set of goods and services purchased, to evaluate average price changes for goods and services. A market basket is a hypothetical consumption bundle that is used to estimate the changes in the general price level. For example, a market basket is the composition of a consumer’s purchases in a year which consists of 10 pens, 5 pencils, and 10 notebooks.

Therefore, a market basket is a hypothetical bundle of consumption goods.

Option “b” is correct.

Other options are incorrect because:

a) A market basket consists of a bundle of goods and services purchased by consumers. It doesn’t include all goods and services.

c) A market basket consists of a bundle purchased by consumers, not producers.

d) It is a fixed set of goods and services.

e) The set of market baskets changes from time to time.