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