If the Price Index Was 90 in Year 1,100 in Year

question 194

Multiple Choice

If the price index was 90 in year 1,100 in year 2,and 95 in year 3,then the economy experienced

• A)10 percent inflation between years 1 and 2 ,and 5 percent inflation between years 2 and 3.
• B)10 percent inflation between years 1 and 2,and 5 percent deflation between years 2 and 3.
• C)11.1 percent inflation between years 1 and 2,and 5 percent inflation between years 2 and 3.
• D)11.1 percent inflation between years 1 and 2,and 5 percent deflation between years 2 and 3.

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Definitions:

Price Elasticity

A measure of how much the quantity demanded of a good responds to a change in its price, with high elasticity indicating sensitivity to price changes.

Supplier

An entity that provides goods or services, typically in exchange for payment.

Revenue

The total income generated by a firm from its business activities, typically from the sale of goods and services to customers.

Midpoint Method

A technique used in economics to calculate the elasticity of demand or supply by using the average of the initial and final quantities and prices.