Suppose That a Consumer's Increase in Nominal Income from the Base

question 62

Essay

Suppose that a consumer's increase in nominal income from the base year exceeds the inflation level given by a Paasche cost of living index for their level of purchases:
(
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Is this information enough to imply how the consumer's level of well-being has changed? (Hint: Use a revealed preference argument.)

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Definitions:

Setup Costs

The expenses involved in configuring a production process or equipment before manufacturing a new batch or type of product.

Variable Costs

Expenses that change in proportion to the level of production or business activity, such as raw materials, labor, and energy costs.

EMV

Expected Monetary Value; a decision rule used in decision analysis where you multiply the value of each possible outcome by its probability of occurrence, summing all these products to get an overall measure.