Calculate the ideal and the laspeyres cost-of-living index

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The utility that Meredith receives by consuming food F and clothing C is given by u(F, C) = FC. Suppose that Meredith?s income in 1990 is $1, 200 and the prices of food and clothing are $1 per unit for each. However, by 1995 the price of food has increased to $2 and the price of clothing to $3. Let 100 represent the cost of living index for 1990. Calculate the ideal and the Laspeyres cost-of-living index for Meredith for 1995.

Reference no: EM131393648

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