An economy only consumes two goods: food and recreation. The current shares in total expenditure are 60 percent food and 40 percent recreation. Suppose the price of food increases by 4 percent and the price of recreation increases by 2 percent. What is the change in the CPI?

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The Answer of An economy only consumes two goods: food and recreation. The current shares in total expenditure are 60 percent food and 40 percent recreation. Suppose the price of food increases by 4 percent and the price of recreation increases by 2 percent. What is the change in the CPI?

An Economy Only Consumes Two Goods: Food and Recreation