Question

The table below lists the prices and quantities consumed of three different goods from 2017−2019.

	2017		2018		2019
Good	Price ($)	Quantity	Price ($)	Quantity	Price ($)	Quantity
A	10	8	16	6	18	5
B	5	18	3	30	4	25
C	1	10	2	5	5	10

    

   

a. For 2017, 2018, and 2019, determine the amount that a typical consumer pays each year to purchase the quantities listed in the table above.

Instructions: Round your answers to the nearest whole number.

	2017	2018	2019
Consumer expenditure	$180	$196	$340

Instructions: Round your answers to two decimal places.

b. The percentage change in the amount the consumer paid is 8.88% from 2017 to 2018, and 73.46% from 2018 to 2019.

Instructions: Round your answers to two decimal places.

d. Suppose we take 2017 as the base year, implying that the market basket is fixed at 2017 consumption levels. Using 2017 consumption levels, the rate of inflation was ? % from 2017 to 2018, and ? % from 2018 to 2019.

Instructions: Round your answers to two decimal places.

e. Repeat the exercise from part d, now assuming that the base year is 2018. Using 2018 consumption levels, the rate of inflation is ? % from 2017 to 2018, and ? % from 2018 to 2019.

f. Your answers from parts d and e were different because : the base years put different weights on the goods prices have changed or the base years have the same consumption quantities or income has changed.

Answer 1

Since there are 3 goods. So total expenditure or cost incurred on purchase of those goods will be the sum of individual costs on purchase of goods A,B and C respectively.

Expenditure on good A=price of good A× quantity purchased of good A. Similarly we can find expenditure of others goods as well. The solution to every subparts is given below.

The inflation rates were approximately same (by two places of decimal) by taking base year 2017 and year 2018.