UESTION i) Let\'s say a frictional daily newspaper in Selangor, Selangor News, c
ID: 1164225 • Letter: U
Question
UESTION i) Let's say a frictional daily newspaper in Selangor, Selangor News, cost RM0.50 in 1980, and RM1.20 in 2006. The average wage rate in manufacturing in Selangor was RM3.23 per hour in 1980 and RM14.32 in 2006 a) By what percentage did the price of newspaper rise? b) By what percentage did the wage rise? c) In each year, how many minutes does a worker have to work to earn enough to buy a newspaper? d) Did workers' purchasing power in terms of newspaper rise or fall? i) Suppose that the residents of Vegopa spend all of their income on long beans, beans sprouts and carrots. In 2006, they buy 100 strands of long beans for RM200, 50 kilos of beans sprouts for RM75, and 500 carrots for RM 50. In 2007 they buy 75 strands of long beans for RM225, 80 kilos of beans sprouts for RM120, and 500 carrots for RM100 a) Calculate the price of each vegetables in each year b) Using 2006 as the base year, calculate the CPI for each year c) What is the inflation rate in 2007. Explairn. QUESTION 2 Due to a recession, ABC Enterprises' sales decline. In order to reduce losses, ABC lays off 10 percent of its labor force, including Don, Ellen, and Frank. ABC indicates that it will hire all its workers back within two months. In each of the following cases, explain if the person is employed unemployed, or not in the labor force (a) Don decides he is going to use the two months to go fishing in Montana. (b) Ellen questions whether ABC will really hire her back. She quickly finds another job. (c) Frank's wife decides she wants to go back to work, but urges him to go back to school. He agrees and resigns his position at ABC. He also decides to devote all of his efforts to school. His wife starts looking for a job to support them.
Explanation / Answer
1.
A.
Percentage rise in price of newspaper = (1.2-.5)/.5 = 140%
B.
Percentage rise in wages = (14.32-3.23)/3.23 = 343.34%
C.
In 1980, minutes required to work to buy a newspaper = (.5/3.23)*60 = 9.29 minutes
In 2006, minutes required to work to buy a newspaper = (1.2/14.32)*60 = 5.03 minutes
D.
Purchasing power rose, because in 2006, workers have to work relatively less numbers of minutes.
2.
A.
In 2006,
Price of long beans = 200/100 = RM2 per strands
Price of bean sprouts = 75/50 = RM1.5 per KG
Price of carrots = 50/500 = RM.1 per Carrot
In 2007,
Price of long beans = 225/75 = RM3 per strands
Price of bean sprouts = 120/80 = RM1.5 per KG
Price of carrots = 100/500 = RM.2 per carrot
B.
As 2006 as base year,
The CPI of 2006 = 100
CPI in 2007 = (value of basket in 2007/Value of basket in 2006)*100
Here, the consumption quantities of 2006, will be considered in 2007.
CPI in 2007 = ((100*3+50*1.5+500*.2))/(100*2+50*1.5+500*.1))*100
CPI in 2007 = 146.15
C.
Inflation rate in 2007 = (146.15 – 100)/100 = 46.15%
It is the % increase the basket of goods in 2007, in comparison to the price of the same basket in 2006.
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