Foundations of Economics (8th Edition)
8th Edition
ISBN: 9780134486819
Author: Robin Bade, Michael Parkin
Publisher: PEARSON
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Chapter 23, Problem 8IAPA
To determine
To explain:
The catalog to be chosen by an individual with reference to any biases in the
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Refer 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%
Based on surveys conducted by the BLS, the CPI basket assigns a weight of approximately 15% to transportation spending. Suppose you walk to your workplace every day and you do not use any other means of transportation.
With everything else the same, if the price of transportation services increases by 10%, by how much would the CPI increase?
Is the CPI measuring the true change in your cost of living?
The weight of the item such as food or housing will determine the effect of price changes on CPI
TRUE
FALSE
Chapter 23 Solutions
Foundations of Economics (8th Edition)
Ch. 23 - Prob. 1SPPACh. 23 - Prob. 2SPPACh. 23 - Prob. 3SPPACh. 23 - Prob. 4SPPACh. 23 - Prob. 5SPPACh. 23 - Prob. 6SPPACh. 23 - Prob. 7SPPACh. 23 - Prob. 8SPPACh. 23 - Prob. 9SPPACh. 23 - Prob. 10SPPA
Ch. 23 - Prob. 1IAPACh. 23 - Prob. 2IAPACh. 23 - Prob. 3IAPACh. 23 - Prob. 4IAPACh. 23 - Prob. 5IAPACh. 23 - Prob. 6IAPACh. 23 - Prob. 7IAPACh. 23 - Prob. 8IAPACh. 23 - Prob. 9IAPACh. 23 - Prob. 10IAPACh. 23 - Prob. 1MCQCh. 23 - Prob. 2MCQCh. 23 - Prob. 3MCQCh. 23 - Prob. 4MCQCh. 23 - Prob. 5MCQCh. 23 - Prob. 6MCQCh. 23 - Prob. 7MCQCh. 23 - Prob. 8MCQ
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