In the Calculation of the CPI,books Are Given Greater Weight

question 110

Multiple Choice

In the calculation of the CPI,books are given greater weight than magazines if

• A)consumers buy more books than magazines.
• B)the price of books is higher than the price of magazines.
• C)it costs more to produce books than it costs to produce magazines.
• D)books are more readily available than magazines to the typical consumer.

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Definitions:

Loss of Value

The decrease in worth of an asset or investment over time, often due to market fluctuations or the asset's deterioration.

Total Utility

The overall satisfaction or happiness a consumer derives from consuming a certain quantity of a good or service.

Marginal Utility

is the added satisfaction or benefit a consumer gets from consuming one additional unit of a good or service.

Utility-Maximizing Rule

The principle that to obtain the greatest total utility, a consumer should allocate money income so that the last dollar spent on each good or service yields the same marginal utility (MU). For two goods X and Y, with prices Px and Py, total utility will be maximized by purchasing the amounts of X and Y such that MUx/Px = MUy/Py for the last dollar spent on each good.