In a Simple Economy, People Consume Only 2 Goods, Food

Essay

In a simple economy, people consume only 2 goods, food and clothing. The market basket of goods used to compute the CPI consists of 50 units of food and 10 units of clothing.
$\begin{array}{|l|c|c|}\hline & \text { Food } & \text { Clothing } \\\hline 2013 \text { price per unit } & € 4 & € 10 \\\hline 2014 \text { price per unit } & € 6 & € 20 \\\hline\end{array}$

a. What is the percentage increases in the price of food and in the price of clothing?
b. What is the percentage increase in the CPI?
c. Do these price changes affect all consumers to the same extent? Explain.