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Business, 19.03.2020 02:29 shikiaanthony

The typical consumer's food basket in the base year 2015 is as follows: 30 chickens at $4 each 10 hams at $5 each 10 steaks at $8 each A chicken feed shortage causes the price of chickens to rise to $5.00 each in the year 2016. Hams rise to $7.00 each, and the price of steaks is unchanged. A. Calculate the change in the "cost-of-eating" index between 2015 and 2016. Year Cost of the basket 2015 $ 2016 $ Instructions: Enter your responses rounded to one decimal place. The official cost-of-eating index has by %. B. Suppose that consumers are completely indifferent between two chickens and one ham. For this example, how large is the substitution bias in the official "cost-of-eating" index? The in the cost-of-eating index is %. The of inflation in the cost of eating reflects substitution bias.

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