Let Us Reconsider the Case of Ronald in Problem 4

question 22

Multiple Choice

Let us reconsider the case of Ronald in Problem 4. 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 $3, and his current consumptions of good 1 and good 2 are 25 and 20 respectively, what is the Laspeyres price index of current prices relative to base year prices? (Pick the most nearly correct answer.)

• A) 1
• B) 1.67
• C) 0.75
• D) 2.83
• E) 2.50

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Definitions:

Act of Omission

A failure to take action when there is a duty to act, which may result in liability.

Crime

A wrong against society proclaimed in a statute and punishable by society through fines and/or imprisonment—or, in some cases, death.

White-Collar Crime

Nonviolent crime committed by individuals or corporations to obtain a personal or business advantage.

Illegal Act

An action that is forbidden by law, regulation, or statute, leading to legal penalties if committed.