On the Planet Homogenia Every Consumer Who Has Ever Lived

question 18

Multiple Choice

On the planet Homogenia every consumer who has ever lived consumes only two goods, x and y, and has the utility function U(x, y) = xy.The currency in Homogenia is the fragel.In this country in 1900, the price of good 1 was 1 fragel and the price of good 2 was 2 fragels.Per capita income was 60 fragels.In 2000, the price of good 1 was 5 fragels and the price of good 2 was 3 fragels.The Laspeyres price index for the price level in 2000 relative to the price level in 1900 is

• A)2.67.
• B).5.75.
• C)4.
• D).3.25.
• E).not possible to determine from this information.