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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.
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Food
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Clothing
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2002 price per unit
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$4
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$10
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2003 price per unit
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$6
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$20
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a.
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What are the percentage increases in the price of food and in the price of clothing?
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b.
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What is the percentage increase in the CPI?
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c.
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Do these price changes affect all consumers to the same extent? Explain.
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