On the Planet Homogenia Every Consumer Who Has Ever Lived

question 8

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 84 fragels.In 2000, the price of good 1 was 1 fragels and the price of good 2 was 5 fragels.The Laspeyres price index for the price level in 2000 relative to the price level in 1900 is

• A)1.75.
• B)3.
• C)2.
• D)2.25.
• E)not possible to determine from this information.