Table 11-6. The table below applies to an economy with only two goods - hamburgers and hot dogs. The fixed basket consists of 4 hamburgers and 8 hot dogs. $$\begin{array} { l c c }
\hline \text { Year } & \text { Priee of hamburegers } & \text { Prife of hat doges } \
\hline 2009 & \$ 5.00 & \$ 3.00 \
2010 & 5.50 & 3.30 \
2011 & 5.61 & 3.63 \
\hline
\end{array}$$
-Refer to Table 11-6. Which of the following scenarios is consistent with this statement? "The cost of living increased by 25 percent between 2009 and 2011."

Question

Table 11-6. The table below applies to an economy with only two goods - hamburgers and hot dogs. The fixed basket consists of 4 hamburgers and 8 hot dogs. $$\begin{array} { l c c } 
\hline \text { Year } & \text { Priee of hamburegers } & \text { Prife of hat doges } \
\hline 2009 & \$ 5.00 & \$ 3.00 \
2010 & 5.50 & 3.30 \
2011 & 5.61 & 3.63 \
\hline
\end{array}$$
-Refer to Table 11-6. Which of the following scenarios is consistent with this statement? "The cost of living increased by 25 percent between 2009 and 2011."

Quizplus · Accepted Answer

To calculate the cost of living, we need to use the fixed basket consisting of 4 hamburgers and 8 hot dogs. The cost of the fixed basket in 2009 is:

4 hamburgers x $5.00 = $20.00 
8 hot dogs x $3.00 = $24.00 
Total cost of fixed basket = $44.00

Similarly, the cost of the fixed basket in 2011 is:

4 hamburgers x $5.61 = $22.44 
8 hot dogs x $3.63 = $29.04 
Total cost of fixed basket = $51.48

Therefore, between 2009 and 2011, the cost of the fixed basket increased by:

($51.48 - $44.00) / $44.00 x 100% = 17%

This is not a 25% increase, so we need to find a scenario where the cost of living increased by 25%.

If the price of a hot dog was $4.07 rather than $3.63 in 2011, with other prices in the table remaining fixed, then the cost of the fixed basket in 2011 would be:

4 hamburgers x $5.61 = $22.44 
8 hot dogs x $4.07 = $32.56 
Total cost of fixed basket = $55.00

Now, the percentage increase in the cost of living between 2009 and 2011 is:

($55.00 - $44.00) / $44.00 x 100% = 25%

Therefore, scenario B is consistent with the statement that the cost of living increased by 25% between 2009 and 2011.

Table 11-6 -Refer to Table 11-6