Question

In Bovania, milk constitutes 56% of the typical basket of goods for a typical consumer. Let's say the price of milk rises by 4% and the prices of all other goods fall by 10%. Based on the information given, we can definitely say__________________.

a. the consumer price index (CPI) in Bovania is greater than in the previous year.b. the CPI in Bovania is less than in the previous year.c. if consumers get a 4% pay raise, they are worse off in terms of their real income compared to inflation as measured by the Bovanian CPI.d. because milk is a necessity, consumers are automatically worse off no matter what pay increase they may have received.e. shoe-leather costs have decreased.

Answer 1

b. the CPI in Bovania is less than in the previous year.

Step-by-step explanation:

The CPI in Bovania is less than in the previous year.