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Suppose That a Consumer's Increase in Nominal Income from the Base

Question 63

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Suppose that a consumer's increase in nominal income from the base year is exceeded by the inflation level given by a Paasche cost of living index for their level of purchases: Suppose that a consumer's increase in nominal income from the base year is exceeded by the inflation level given by a Paasche cost of living index for their level of purchases: Show that this information implies that the consumer is strictly worse-off as compared to the base year. (Hint: Use a revealed preference argument.) Show that this information implies that the consumer is strictly worse-off as compared to the base year. (Hint: Use a revealed preference argument.)

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The information given above implies that...

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