HomeworkLib
Question

Suppose there are only two goods in the economy, apples and oranges and the market that...

Suppose there are only two goods in the economy, apples and oranges and the market that composes CPI is 4 apples 2 oranges. Assume that 2011 is the base year.

2011 2012

P apple 1 1.03

P Orange 1 1.09

Question?

Consider an individual who receives a fixed income from the government. Suppose this person receives 24$ and uses it to buy 16 apples and 8 oranges. Suppose their income is indexed to the CPI. How much will they receive on 2012? Since oranges are more costly than apples on January 2012, the fixed income might decide to consume more apples? Suppose they chose to consume 18 apples. How many oranges will they consume?

PLease and thank you :)

business   economics   
0 0
Add a comment Improve this question Transcribed image text
Next > < Previous
Sort answers by oldest

Homework Answers

Answer #1

Ans

Sum of old price=1+1=2

Sum of new price=1.03+1.09=2.12

Cpi=2.12/2(100)=106

So prices have risen by 106-100=6%

Hence income should increase by =24+24(6%)=25.44. Thus is amount that they will receive in 2012

Amount left after consuming 18 apples=25.44-(1.03)(18)=6.9

So they will consume oranges=6.9/1.09=6.33

0 0
Add a comment
Know the answer?
Add Answer to:
Suppose there are only two goods in the economy, apples and oranges and the market that...
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for? Ask your own homework help question. Our experts will answer your question WITHIN MINUTES for Free.
Similar Homework Help Questions

  • Suppose in the year 2025, an economy produces 50 apples and 20 oranges. In 2025 an...

    Suppose in the year 2025, an economy produces 50 apples and 20 oranges. In 2025 an apple sells for $1, an orange sells for $2. Suppose in the year 2026, an economy produces 60 apples and 30 oranges. In 2026 an apple sells for $2, an orange sells for $3. Suppose 2025 is the base year for statistical calculations, meaning that $90 would be the value for both nominal and real GDP in 2025. In 2026, nominal GDP is _____,...

  • Suppose you are shopping for fruit at the grocery store. There are apples, bananas and oranges....

    Suppose you are shopping for fruit at the grocery store. There are apples, bananas and oranges. In how many ways can you buy 10 items of fruit? For example, you can buy 5 bananas, 3 oranges, and 2 apples; you could also buy 10 bananas and 0 apples and oranges. In how many ways can you buy 10 items of fruit, where you have to have at least one banana, one orange, and one apple?

  • Consider the economy of Orchard that produces two types of products, apples and oranges. Use the...

    Consider the economy of Orchard that produces two types of products, apples and oranges. Use the data below to answer the following questions.                            Apples                    Oranges A                                 40                              0 B                                 30                              20 C                                 20                              35 D                                 10                              45 E                                  0                                 50 a) Draw the production possibility curve for Orchard. b) What is the opportunity cost of producing 10 more bushels of apples starting at point B? How does that compare with the cost of 10 more bushels of apples at point D? c) What would you say about Orchard if it is...

  • Question A3 [2 marks Consider a pure-exchange economy with two consumers, Joe and Jane, and two goods, apples and o...

    Question A3 [2 marks Consider a pure-exchange economy with two consumers, Joe and Jane, and two goods, apples and oranges. Suppose the total supply of apples is 10 and the total supply of oranges is also 10. Suppose also that, at the initial allocation, Joe's marginal utility of apples is 3 and his marginal utility of oranges is 5. Jane's marginal utility of apples is 6 and her marginal utility of oranges is 10. The current price of apples is...

  • Please help. Thank you!!! 1. A certain economy produces only 2 goods, apples and bananas. The...

    Please help. Thank you!!! 1. A certain economy produces only 2 goods, apples and bananas. The quantity produced and price of each is given below in several years. Apples-Q 50 60 70 Apples-P 6 7 8 Bananas-Q 100 105 110 Year 2001 2002 2003 Bananas-P 1.5 Let the CPI basket be 1 apple and 2 bananas. Using 2002 as the base year. Calculate the CPI NGDP and RGDP for each year a. b. What causes inflation?

  • 1. (a) Suppose you spend all of your income on apples and oranges, which are both...

    1. (a) Suppose you spend all of your income on apples and oranges, which are both normal goods and which are imperfect substitutes. If the price of apples increases, will you consume more or fewer apples as a result of the substitution effect? What about the income effect? (b) Suppose you consume two goods: Ramen and Starbucks coffee. Ramen is an inferior good and Starbucks coffee is a normal good. The price of Ramen increases. Assume Ramen is not a...

  • Consider a simple economy that produces two goods: pencils and oranges. The following table shows the...

    Consider a simple economy that produces two goods: pencils and oranges. The following table shows the prices and quantities of the goods over a three-year period Pencils Oranges Price Price Quantity Quantity (Number of pencils) 110 155 120 (Dollars per pencil) (Dollars per orange) (Number of oranges) Year 2012 2013 2014 150 215 180 Use the information from the preceding table to fill in the following table Real GDP (Base year 2012, dollars) Nominal GDP (Dollars) GDP Deflator Year 2012...

  • Avi and Maya are the only two consumers in an economy. Avi’s demand for apples is...

    Avi and Maya are the only two consumers in an economy. Avi’s demand for apples is given by the equation xA(p) = 6 − p, where p is the per unit price of apple. Maya’s demand for apples is given by the equation xB (p) = 10 − p. (a) Derive the aggregate demand x(p) = xA(p)+xB(p). Draw the aggregate demand where price of apples is on the vertical axis and the aggregate quantity consumed is on the horizontal axis....

  • 5. Real versus nominal GDP Consider a simple economy that produces two goods: pencils and oranges....

    5. Real versus nominal GDP Consider a simple economy that produces two goods: pencils and oranges. The following table shows the prices and quantities of the goods over a three-year period Pencils Oranges Price (Dollars per orange) 2 4 4 Price Year 2012 2013 2014 Quantity (Number of pencils) 145 165 110 Quantity (Number of oranges) 195 225 165 (Dollars per pencil) Use the information from the preceding table to fill in the following table Nominal GDP Real GDP (Dollars)...

  • Consider an economy with two goods, cheese and salad. Suppose that the prices and quantities sold...

    Consider an economy with two goods, cheese and salad. Suppose that the prices and quantities sold in 2012 and 2013 are the following: Good 2012 Price 2013 Price 2012 Quantity 2013 Quantity Cheese 10 12 10 9 Salad 15 16 5 8 a. Calculate the nominal GDP for 2012 and for 2013. Explain how you got your numbers. b. Calculate the real GDP for 2013 using 2012 as a base year c. Calculate the cost of the CPI basket if...

ADVERTISEMENT
Free Homework Help App
Download From Google Play
Scan Your Homework
to Get Instant Free Answers
Need Online Homework Help?
Ask a Question
Get Answers For Free
Most questions answered within 3 hours.
ADVERTISEMENT
ADVERTISEMENT