Econ HW 3 - Homework#3 1 a According to Table A the price...

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Homework #3 1. a. According to Table A, the price of apparel has fallen by 1.8 % since September of last year. The major reason is globalization and the competition of international trade. Increasing amount of apparel and textile are imported from foreign countries where the labor and other costs are low, such as China. More apparel companies set up factories in these low cost countries to reduce the cost. Therefore, the apparel has experienced a price decline. b. Food and energy are necessities for people’s daily lives. The demand of food and energy are inelastic, so a temporary shock shortage can largely increase their prices. However, when the temporary shortage crisis is over, the price of food and energy are likely to decrease or even back to normal. An increase in food products and energy can give a false measure of inflation. Therefore, we treated food products and energy differently. As explained in the last paragraph, due to the necessary nature of food products and
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Econ HW 3 - Homework#3 1 a According to Table A the price...

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