Question

year price per milk kg quantity of milk kg price of honey kg quantity of honey...

year price per milk kg quantity of milk kg price of honey kg quantity of honey
2011 1 100 2 50
2012 1 200 2 100
2013 2 200 4 100

Did economic well-being rise more in 2012 or 2013? Explain.

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Answer #2

Real GDP using base year as 2013
Real GDP for 2011= (1*100 + 2*50) = $200
Real GDP for 2012= (1*200 + 2*100) = $400
Real GDP for 2013= (1*200 + 2*100) = $400

Percentage change in real GDP in year 2012 = (400-200)*200 = 100%
Percentage change in real GDP in year 2013 = (400-400)*400 = 0%

Since real GDP rose in the year 2012 whereas there is no change in real GDP in the year 2013 thus the economic well-being rose in 2012 and also we can notice that real GDP rose in 2012 not in 2013 although price remains constant in 2012 whereas it increases in the year 2013

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