Question

The unit prices and quantities for two goods for two years

are shown in the table below. Assume that consumers are
purchasing 8 units of water and 10 loaves of bread. Also
assume that Year 1 is the base year.
Year
Price of Water Price of Bread
(dollars) (dollars)
$1.00
$2.00
1
2
2.00
3.00

Answer 1

Answer: $28

Explanation:

The price of water in Year 1 is $1 per unit. There are 8 units so their value is:

= 8 * 1

= $8

Price of a loaf of bread is $2. The basket contains 10 loaves of bread. Value is:

= 10 * 2

= $20

Total value of the basket in year 1 is:

= 20 + 8

= $28