Table 11-6 -Refer to Table 11-6

question 217

Multiple Choice

Table 11-6. The table below applies to an economy with only two goods - hamburgers and hot dogs. The fixed basket consists of 4 hamburgers and 8 hot dogs. $$\begin{array} { l c c } \hline \text { Year } & \text { Priee of hamburegers } & \text { Prife of hat doges } \\\hline 2009 & \$ 5.00 & \$ 3.00 \\2010 & 5.50 & 3.30 \\2011 & 5.61 & 3.63 \\\hline\end{array}$$
-Refer to Table 11-6. If the base year is 2010, then the consumer price index is

• A)100 in 2009, 109 in 2010, and 115 in 2011.
• B)95.90 in 2009, 100 in 2010, and 107.44 in 2011.
• C)90.91 in 2009, 100 in 2010, and 106.36 in 2011.
• D)88.82 in 2009, 100 in 2010, and 107.44 in 2011.

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Definitions:

Substitution Effect

The effect observed when consumers replace more expensive items with cheaper alternatives due to changes in relative price levels, affecting demand for goods.

Utility Function

Describes how different combinations of goods or services (or different outcomes) provide levels of satisfaction or utility to an individual.

Substitution Effect

The change in consumption patterns due to changes in the relative prices of goods, leading consumers to substitute more expensive items with cheaper alternatives.

Giffen Good

A product that experiences an increase in demand as its price increases, contrary to the law of demand, typically because it is a staple whose cheaper substitutes are not as affordable.