Question

The reason economists create a market basket is: O to track its changing quantities to reflect changes in the cost of living. O to see how the cost of buying the goods and services on the list changes over time. O to know how typical consumers are being affected by changes in production. to know how typical producers are being affected by changes in price.

Answer 1

Solution:

Economists typically create a market basket to check how the price changes affect consumer behaviour, its tastes and cost of living. In order to make a proper comparison, that same fixed 'market basket' or same quantity of goods and services are used, to track effects of price change only.

All this eliminates options A, C (as quantities and/or production is unchanged, only prices are changed), and D (as consumer behaviour is checked, not producer behaviour). Thus, the correct option is (B) to see how the cost of buying the goods and services on the list changes over time.