Re: ECO402 Assignment 1 Solution and Discussion
SEMESTER FALL 2020
MICROECONOMICS (ECO402)
ASSIGNMENT # 01
DUE DATE: 10
TH DECEMBER, 2020
MARKS: 15
The Case:
Breakfast is often called ‘the most important meal of the day’. As the name
suggests, breakfast breaks the overnight fasting period. It replenishes your
supply of glucose to boost your energy levels and alertness. It also helps
to provide other essential nutrients required for good health. Breakfast can
help to better weight management, reduce risk of type 2 diabetes, and heart
disease in the long term. Milk, eggs, and tea are commonly used in
breakfast in Pakistan. Therefore, changes in the prices of these products
have a major impact on the cost of living. The information about their
nominal prices and CPI from 2018 to 2020 is giver below:
Item Unit Year Nominal Price CPI
Milk Liter
Jun -2018 85.00 283.97
Jun -2019 90.00 296.50
Jun -2020 97.50 322.10
Eggs Dozen
Jun -2018 83.13 182.83
Jun -2019 79.38 172.61
Jun -2020 115.63 229.01
Tea Packet
Jun -2018 205.26 304.69
Jun -2019 221.05 322.11
Jun -2020 242.10 350.92
Requirements:
Keeping in mind the above scenario, solve the following questions.
a. By assuming June-2018 as the base year, find the real price of milk,
eggs, and tea in each year.
b. If the base year bundle has 10 liter milk, 3 dozen eggs, and 2 packets
of tea then find the Laspeyres index by assuming June-2018 as the
base year and June-2020 as the current year.
Marks: (9+6)