Answer:
The correct answer is option a.
Explanation:
The consumer price index or CPI is a measure to calculate the change in the price level or the rate of inflation. It calculates the changes in the price of a basket of goods generally purchased by the consumers.
But CPI does not always accurately calculate inflation. It involves substitution bias and quality adjustment bias.
For instance, when the price of chicken increases as compared to the price of turkey, the consumers will buy more turkey and less chicken. So the consumer expenditure will not increase as they will be substituting turkey for chicken.
But the CPI will increase with an increase in chicken price. An increase in CPI implies an increase in inflation, so inflation will be overstated.
Answer:
If output doubles when inputs double, the production function will be characterized by a <u>constant returns to scale</u>.
Explanation:
In economics, returns to scale refers to a long run situation that reveals to the proportionate change in output when capital and labor inputs become variable or change.
The three possible types of returns to scale are as follows:
1. Increasing returns to scale: This occurs when the proportionate change in output is greater than the proportionate change in capital and labor inputs.
2. Decreasing returns to scale: This occurs when the proportionate change in output is less than the proportionate change in capital and labor inputs.
3. Constant returns to scale: This occurs when the proportionate change in output is the same as the proportionate change in capital and labor inputs.
Based on the above explanation therefore, if output doubles when inputs double, the production function will be characterized by a <u>constant returns to scale</u>. This is because the the proportionate change (double) in output is the sames as the proportionate change (double) in inputs.
Answer:
The correct answer is C)
Explanation:
Given that the price for bananas is cheaper in Guatemala, suppliers will be driven to make a quick profit just by buying from the Guatemalan market to sell in the Honduras economy.
This, however, will cause the prices of bananas to rise in Guatemala. Because, according to the basic principles of economics, the higher the demand the higher the price.
Cheers!
Specialization like that is called as "technical" skills.
