Answer to Question #16786 in Microeconomics for madzna rahim

Question

The utility that Meredith receives by consuming food F and clothing C is given by U(C,F)=CF.Suppose that Meredith`s income in 1990 is $1200 and the prices of food and clothing are $1 per unit for each .By 2000,however ,the price of food has increased to $2 and the price of clothing to $3.Let 100 represent the cost of living index for 1990.Calculate the ideal and the Laspeyres cost-of- living index for Meredith for 2000.(Hint:Meredith will spend equal amounts on food and clothing with these references)