In Felixania,cat Food Constitutes 45% of the Typical Basket of Goods

question 9

Multiple Choice

In Felixania,cat food constitutes 45% of the typical basket of goods for a typical consumer,dog food constitutes 3%,and all other goods constitute the remaining 52%.Assume the price of cat food rises by 4%,the price of dog food falls by 10%,and prices remain constant for all other goods.Based on the information given,we can definitely say:

• A) because the price of dog food fell by more than the price of cat food rose, the consumer price index (CPI) must have decreased.
• B) the CPI in Felixania is more than in the previous year.
• C) if consumers get a 4% pay raise, they are worse off in terms of their real income compared to inflation as measured by the Felixanian CPI.
• D) because cat food is a luxury (as is dog food), consumers are certainly no worse off in terms of their real wages as measured by the Felixanian CPI.
• E) menu costs have decreased.

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Definitions:

Self-Esteem

An individual's subjective evaluation of their own worth, including beliefs about oneself and emotional states.

Need For Cognition

A personality trait that denotes a person's love for and engagement in thinking, problem-solving, and complex discussions.

Psychological Reactance Theory

A motivational theory proposing that when people feel their freedom to choose is being limited, they are motivated to regain that freedom.

Regulatory Fit

A state of congruence or compatibility between an individual's regulatory orientation (e.g., promotion or prevention focus) and the task or goal at hand.