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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 has 50 units of food and 10 units of clothing.
food clothing
2002 price $4 $10
2003 price $6 $20
a. What are the percentage increases in the price of food and in the price of clothing?
b. What is the CPI for 2002?
c. What is the CPI for 2003?
c. What is the inflation rate using 2002 as the base year?
c. Do these price changes affect all consumers to the same extent? Explain.
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