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Suppose that people consume only three goods, as shown in this table:
Suppose that people consume only three goods, as shown in
a. What is the percentage change in the price of each of the three goods?
b. Using a method similar to the consumer price index, compute the percentage change in the overall price level.
c. If you were to learn that a bottle of Gatorade increased in size from 2011 to 2012, should that information affect your calculation of the inflation rate? If so, how?
d. If you were to learn that Gatorade introduced new flavors in 2012, should that information affect your calculation of the inflation rate? If sohow?
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