Suppose the price level reflects the number of dollars needed to buy a basket of goods containing one cup of coffee, one donut, and one newspaper. In year one, the basket costs $9.00. In year two, the price of the same basket is $8.00. From year one to year two, there is (deflation/inflation (1)) at an annual rate of (???? (2)). In year one, $72.00 will buy (?????(3)) baskets, and in year two, $72.00 will buy (?????(4)) baskets. This example illustrates that, as the price level falls, the value of money (rises/falls/remains the same (5)).
Answer questions:
1.
2.
3.
4.
5.
Suppose the price level reflects the number of dollars needed to buy a basket of goods containing one cup of coffee, one donut, and one newspaper. In year one, the basket costs $9.00. In year two, the price of the same basket is $8.00. From year one to year two, there is (deflation/inflation (1)) at an annual rate of (???? (2)). In year one, $72.00 will buy (?????(3)) baskets, and in year two, $72.00 will buy (?????(4)) baskets. This example illustrates that, as the price level falls, the value of money (rises/falls/remains the same (5)).
Answer questions:
1.
2.
3.
4.
5.
For unlimited access to Homework Help, a Homework+ subscription is required.
Related textbook solutions
Related questions
The table shows the maximum amount of money you would be willing to pay for increasing numbers of veggie sushi pieces at Oishii Sushi:
Sushi Pieces |
Maximum Payment |
1 |
$2.00 |
2 |
3.80 |
3 |
5.40 |
4 |
6.80 |
5 |
8.00 |
6 |
9.00 |
7 |
9.80 |
8 |
10.40 |
9 |
10.80 |
10 |
11.00 |
11 |
11.00 |
Find the marginal utility for each sushi piece. What is the meaning of the marginal utility of the 11th piece?
If the price of sushi pieces is $1.25 each, how many will you buy?
If the price falls to $.50, how many will you buy? Explain why you will not buy one more.
Suppose Oishii stops selling sushi pieces individually, and only sells them in rolls, each containing 5 pieces. The price of a roll is $2.50. How many total sushi pieces will you consume? Reconcile your answers to c) and b).
Ā
What is the consumer surplus, or net benefit, that you get from purchasing sushi pieces at $.50 as in c)?