Principles of Economics, 7th Edition

Published by South-Western College
ISBN 10: 128516587X
ISBN 13: 978-1-28516-587-5

Chapter 24 - Part VIII - Measuring the Cost of Living - Problems and Applications - Page 520: 4

Answer

The CPI has increased by 1.8% over the past year. The two largest increases were in food away from home (2.9%) and shelter (3.3%). New vehicles (0.9%) and used vehicles (0.3%) saw the smallest increases. Apparel (-3.1%) and utility (piped) gas (-2.6%) saw the largest decreases.

Work Step by Step

The data used was for the Consumer Price Index in May 2019. The data is not adjusted at all, per the BLS. More people are moving into cities and towns, so there is an increased demand for shelter. In turn, the increased demand shifts the demand curve up, and there is a higher equilibrium price for shelter. For the decrease in utility (piped) gas, more people might be moving to other forms of heat for their shelter (including electricity). Thus, the shift from utility (piped) gas to electricity shifts the demand curve down (and the equilibrium price falls).
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