6. (5 points) In a modern context why is the effect on menu costs of anticipated and unanticipated inflation different? 7. (5 points) In the fall of 2017, Apple introduced two new models of its iPhone. The new models had faster processors and better cameras than the previous model and sold for higher prices. How did the introduction of the new models of the iPhone affect the BLS reported CPI? 8. In the above assume that the price change between iPhone versions was from $400 to $600 and that the change in quality caused the effective quantity to increase from 1 to 1.2 in the minds of consumers. Assume that the contribution to the price paid for the full market basket from other products is $40,000 and that in the base year 2 iPhones were purchased. (a) (5 points) Calculate the percentage error in the BLS reported price of the market basket of $41,200. Note that this is the same as the percentage error in the CPI. (b) (5 points) Assuming there is also a similar quality and price difference in all the other products composing the market basket what is the total percentage error of the BLS reported CPI?
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The price change is from $400 to $600, so the percentage change in price is: (600 - 400) / 400 = 0.5 or 50% Show more…
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