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.

2002 price per unit Food: $4 Clothing: $10
2003 price per unit Food: $6 Clothing: $20
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.

Question

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.

2002 price per unit  Food: $4  Clothing: $10
2003 price per unit  Food: $6  Clothing: $20
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.