On the Planet Homogenia Every Consumer Who Has Ever Lived

question 24

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 3 fragels and the price of good 2 was 4 fragels.The Laspeyres price index for the price level in 2000 relative to the price level in 1900 is

• A)2.50
• B)3.50.
• C)2.33.
• D)4.
• E)not possible to determine from this information.

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