Answer:
a. less ice cream, less coffee
Explanation:
The percentage change in CPI is given by:
[tex]\%CPI = \frac{177-150}{150}=0.18[/tex]
The percentage change in the prices of coffee and ice cream, respectively, are:
[tex]\%C = \frac{5-4}{4}=0.25\\\%I = \frac{2.50-2.00}{2.00}=0.25[/tex]
Both coffee and ice cream had an increase in price above the CPI increase, which means that both goods are being sold above the equilibrium price and thus their demand is likely to fall.
People likely will buy less ice cream, less coffee
If the CPI rises from 150 to 177, then people likely will buy:
According to the given question, we are asked to find out what would happen if the CPI rises from 150 to 177 based on the price rise of a gallon of ice cream and a can of coffee.
As a result of this, we can see that if the price of both goods increase above the CPI, then they are being sold higher than the equilibrium price which would ultimately lead to reduction in demand based on the law of demand and supply.
Therefore, the correct answer is option A
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