posted by shelby .
Suppose that people consume only three goods, as shown in this table: (5 Marks)
1998 price $2
1998 quantity 100
1999 price $2
1999 quantity 100
What is the percentage change in the price of each of the three goods?
What is the percentage change in the overall price level?
Do tennis racquets become more or less expensive relative to Gatorade?
Does the well-being of some people change relative to the well-being of others? Explain.
Again, take a shot. If you know how to calculate the CPI (from your previous post), you will have no trouble with this one.
A. The percentage change in prices are
0 for Tennis Balls, 50% for Tennis Racquets and 100% for Gatorade.
B. At first glance, the tennis Racquet is still more expensive compared to Gatorade. You need to pay $60 for a racquet, but you get 200 Gatorade only for $2. Gatorade is complement goods, you drink it after tennis. So an increase in racguet price will cause a demand for racguet and Gatorade to decrease. In theory, an increase of Gatorade price of 100% will make people play less tennis. It could have efects on their health