Suppose that people consume only three goods, as shown in this table:

a. What is the percentage change in the price of each of the three goods?

b. Using a method similar to the CPI, compute the percentage change in the overall price level.

c. If you were to learn that a bottle of Gatorade increased in size from 2020 to 2021, should that information affect your calculation of the inflation rate? If so, how?

d. If you were to learn that Gatorade introduced new flavors in 2021, should that information affect your calculation of the inflation rate? If so, how?

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2020 price 2020 quantity 2021 price 2021 quantity Tennis Balls $2 100 $2 100 Golf Balls $4 100 $6 100 Bottles of Gatorade $1 200 $2 200