Can you say what happened to the overall price


Define inflation. Assume that you live in a simple economy in which only three goods are produced and traded; fish, fruit, and meat. Suppose that on January 2014, fish sold for $2.50 per pound, meat was $3.00 per pound, and fruit was $1.50 per pound. At the end of the year, you discover that the catch was low and that fish prices had increased to $5.00 per pound, but fruit prices stayed at $1.50 per pound and meat prices had actually fallen to $2.00 per pound. Can you say what happened to the overall "price level"?. How might you construct a measure of the "change in the price level"? What additional information might you need to construct your measure? Describe with suitable diagrams.

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Econometrics: Can you say what happened to the overall price
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