Question

In the calculation of the CPI, tea is given greater weight than beer if O a. it costs more to produce tea than it costs to produce beer b. consumers buy more tea than beer c, the price oftea is higher than the price of beer. e d tea is more readily available than beer to the typical consumer here to search

Answer 1

Answer:

Qn.01) Option b. Consumers buy more tea than beer.

Explanation: Consumer price index is the method of measuring the overall cost of goods and services consumed by a consumer. It is determined by calculating the changes in the prices of each item in the precalculated basket of goods and averaging them. The first time a good is purchased the value is pegged as 100 and increase or decrease according to the changes in the price of that good every year. Thus if tea is given more weightage than beer it means that consumers buy more tea than beer.

Qn.02) Option a. True.

Explanation: Production Possibility Frontier calculates the maximum possible combinations of output of two goods or services that can be achieved where all the resources are fully employed. Reallocation of scarce resources from the production of one resource to another involves an opportunity Cost.