Suppose the price of coffee decreases. Explain how and why a consumer on a fixed budget...

Suppose the price of coffee decreases. Explain how and why a consumer on a fixed budget who purchases coffee and tea would adjust the amount of each he buys to be better off. Be sure to explain how the consumer reaches a utility maximizing point after the price change.

Expert Solution

Rahul Sunny answered 2 years ago

The consumer price index (CPI) is a fixed-weight index. It compares the price of a fixed...

The consumer price index (CPI) is a fixed-weight index. It compares the price of a fixed bundle of goods in one year with the price of the same bundle of goods in some base year. Suppose the market basket to compute the consumer price index consists of 200 units of good X, 175 units of good Y, and 60 units of good Z. Year 2013 is the base year. Prices of these goods for the years 2013, 2014, and 2015...

1) when the price of a compliment (cream) decreases, the demand for the related good (coffee)...

1) when the price of a compliment (cream) decreases, the demand for the related good (coffee) A) will shift inward B) will fall C) will shift outward D) remains constant 2) other things being equal, an increase in wages paid to workers in firms making digital devices will cause A) the supply of digital devices to decrease B) the quantity of digital devices supplied to decrease C) the demand for digital devices to decrease D) the quantity of digital devices...

Suppose the Consumer Price Index (CPI) is computed as a Laspeyres price index. Explain the concept...

Suppose the Consumer Price Index (CPI) is computed as a Laspeyres price index. Explain the concept of “substitution bias” in using the CPI to measure the change in the cost of living. Be sure to explain what is meant by the “change in the cost of living.”

Explain why price advertising typically lowers prices and increases consumer welfare

a) If the interest rate decreases, how will it impact the market price of a bond?...

a) If the interest rate decreases, how will it impact the market price of a bond? b) Do long-term bonds have higher price risk than short-term bonds? Please illustrate your point by comparing the price change of two bonds of 1yr and 10yr maturity respectively due to interest rate changes. Assume both bonds have $1000 par and $100 annual coupon payment. show work

1. Explain briefly what the consumer price index is trying to measure and how it is...

1. Explain briefly what the consumer price index is trying to measure and how it is constructed.

Explain briefly what the consumer price index is trying to measure and how it is constructed....

Explain briefly what the consumer price index is trying to measure and how it is constructed. /2

How might a consumer view a price cut as an advantage and how might a consumer...

How might a consumer view a price cut as an advantage and how might a consumer view a price cut as a disadvantage? What is deceptive pricing?

Suppose the federal government unexpectedly decreases its spending. Using the IS-LM model, explain how this contractionary...

Suppose the federal government unexpectedly decreases its spending. Using the IS-LM model, explain how this contractionary fiscal policy affects the real interest rate, r, and total output, Y , in both the short run and the long run. What happens to consumption, C, investment, I, and government expenditure, G, in the short-run? What happens to C, I, G, and r in the long- run? (Note: For full credit, you must provide a brief explanation for why each variable changes or...

QUESTION 33 Average fixed cost always decreases. True False ------------------------ QUESTION 31 If a price ceiling...

QUESTION 33 Average fixed cost always decreases. True False ------------------------ QUESTION 31 If a price ceiling is imposed below the equilibrium price then _____. A. the market can still reach equilibrium B. excess supply is created C. demand will decrease D. supply will increase E. excess demand is created --------------- QUESTION 29 A price floor on corn would have the effect of which of the following? A. Creating an excess supply regardless of the price. B. Creating an excess supply...

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