A basket of goods for a given consumer includes twogoods, X and Z. Consumer income is equal to $1,500 and the prices of these two goods are asfollows:

Px= $25

Pz= $20

This consumer is consuming 10 units of good X.

Suppose that over the course of ayear, the price of good X changes by 20% and the price of good Z changes by 25%.

How much income would be required for the consumer to afford the same quantity of goods X and Z with the newprices?

What is the rate ofinflation? (%) (Enter your response as a percentage rounded to two decimal places.)

Given this change inprices, is it possible for our consumer to buy the original bundle ofgoods?

No

Yes

Uncertain

.