D. Assume that the mix of goods in a basket is kept constant for long periods. If the price of one good rises very rapidly over several years, what will happen to the relative importance of the other goods in the basket? Is this a problem?

Question

Baron Richardson

Business

23 March, 18:54

D. Assume that the mix of goods in a basket is kept constant for long periods. If the price of one good rises very rapidly over several years, what will happen to the relative importance of the other goods in the basket? Is this a problem?

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Answers (1)

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Victoria Meza · Answer 1

Not affected much; Not a problem

Explanation:

Even though in most cases consumers are sensitive to price. Remember, this mix goods are NOT said to be close substitutes. So there should be little or no effect on the importance of the other goods.

This is not a problem because even though the price of one good rises very rapidly over several years, the other good is not affected by price changes.