Suppose the typical consumer only purchases food and clothing, and her utility can be expressed as . Currently, food costs $5 per unit and clothing costs $2 per unit. Her income is $70. If the price of food increases to $6, compare the resulting Laspeyres price index with a true cost of living index.

Question

Suppose the typical consumer only purchases food and clothing, and her utility can be expressed as  . Currently, food costs $5 per unit and clothing costs $2 per unit. Her income is $70. If the price of food increases to $6, compare the resulting Laspeyres price index with a true cost of living index.

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The Answer of Suppose the typical consumer only purchases food and clothing, and her utility can be expressed as  . Currently, food costs $5 per unit and clothing costs $2 per unit. Her income is $70. If the price of food increases to $6, compare the resulting Laspeyres price index with a true cost of living index.

Suppose the Typical Consumer Only Purchases Food and Clothing, and Her