Consider the Case of Ronald

question 32

Multiple Choice

Consider the case of Ronald. Let the prices and consumptions in the base year be as in situation D, where p₁ = 3, p₂ = 1, x₁ = 5, and x₂ = 15. If in the current year, the price of good 1 is $1 and the price of good 2 is $4, and Ronald's current consumptions of good 1 and good 2 are 25 and 5 respectively, what is the Laspeyres price index of current prices relative to base year prices? (Pick the most nearly correct answer.)

• A) 1.50
• B) 2.17
• C) 1.25
• D) 1
• E) 3.25

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