Suppose the average consumer’s expenditure is divided between bread, meat, milk and vegetables in the ratio 4: 3: 2: 1.
During the course of a year, the price of bread falls by 10%, the price of meat increases by 20% and the prices of both milk and vegetables increase by 10%.
What is the increase in the average price level during the year?
5%
2 )
7.3%
3 )
10%
4 )
12.5%
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