In Periods 0 and 1, Ralph Consumed Two Goods, X₁

question 46

Multiple Choice

In periods 0 and 1, Ralph consumed two goods, x₁ and x₂, and his utility functions in the two periods were identical. In period 0 the prices of x₁ and x₂ were $2 and $1 respectively, and Ralph consumed 10 units of x₁ and 80 units of x₂. In period 1 the prices of x₁ and x₂ were identical, and equal to $1. If Ralph consumed 40 units of x₁ and 40 units of x₂ in period 1, then the Laspeyres price index is:

• A)10/9.
• B)2/3.
• C)3/2.
• D)9/10.