In a Simple Economy, People Consume Only 2 Goods, Food

question 37

Essay

In a simple economy, people consume only 2 goods, food and clothing.The market basket of goods used to compute the CPI consists of 50 units of food and 10 units of clothing.
$$\begin{array} { | l | c | c | } \hline & \text { Food } & \text { Clothing } \\\hline \text { 2013 price per urit } & \text { R4 } & \text { R10 } \\\hline \text { 2014 priceper urit } & \text { R6 } & \text { R20 } \\\hline\end{array}$$
a.What is the percentage increases in the price of food and in the price of clothing?
b.What is the percentage increase in the CPI?
c.Do these price changes affect all consumers to the same extent? Explain.

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Definitions:

Sole Proprietorship

A business owned and operated by one individual, where there is no legal distinction between the owner and the business entity.

Corporation

A legal entity recognized by law as separate from its owners, providing limited liability and allowing it to own property, enter contracts, and sue or be sued.

Partnership Agreement

A contract between business partners that outlines the terms, conditions, and responsibilities within the partnership.

Terms And Arrangements

The specific conditions and agreements that form the basis of a contract or agreement between parties.