Answer:
a. Overstates Inflation.
In the case of Mary and Bob, the CPI would have already increased but in this case the price of the minivan increased as well. This will overstate inflation because it will not measure the general rise in price alone (inflation), it will also measure the rise in price as a result of the new minivan having better features.
b. Understated Inflation
Donna's case represents an understated inflation because the quantity shrank yet the price stayed the same. This means that the price is now buying less quantity than it used to which is inflation because more dollars are now required to buy the previous amount. This was not however recorded as there was no change in price.
c. Overstates Inflation
In the case of Zach, the inflation will be overstated because Zach is no longer buying bagels and is now buying muffins so continuing to use bagels as a representative good in the basket of goods used to calculate CPI would be overstating it.
d. Accurate representation of Inflation
In Chris's case, the increase in the price of the same shoe over the years has been because of a general rise in prices and not because it is a different model. It is the same shoe and its price is rising generally so this is an accurate depiction of inflation.
Answer and Explanation:
For project A 1000=500/(1+r) +2500/(1+r)^2
r=.85= 85%
for B r=57.5%
for C r= 44.2%
preference
A>B>C
Answer:
Making bread
Explanation:
Lyta has to specialize in making bread. By specialization, it means that lyta should focus it's productive efforts on making bread, because from the question she clearly has an absolute advantage in making bread Since the question says she is more efficient in making bread compared to the other product. It means she can produce bread in larger quantities at same cost or she can produce same quantity of bread at lower cost.
