In a Simple Economy, People Consume Only Two Goods: Food

Essay

In a simple economy, people consume only two goods: food and clothing. The market basket of goods used to compute the CPI has 50 units of food and 10 units of clothing.
Food Clothing
Last year's price $4 $8
This year's price $6 $16
a. What are 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.