The typical consumer's food basket in the base year 2015 is as follows:
30 chickens at $3 each
10 hams at $5 each
10 steaks at $8 each
A chicken feed shortage causes the price of chickens to rise to $5.00 each in the year 2016. Hams rise to $7.00 each, and the price of steaks is unchanged.
a. Calculate the change in the "cost-of-eating" index between 2015 and 2016.
Cost of eating 2015=
Cost of eating 2016=
The cost of eating index has (increased/decreased) by %
b. Suppose that consumers are completely indifferent between two chickens and one ham. For this example, how large is the substitution bias in the official "cost-of-eating" index?
The in the cost-of-eating index is %.
The of inflation in the cost of eating reflects substitution bias.

Rate of return douglas keel, a financial analyst for orange industries, wishes to estimate the rate of return for two similar-risk investments, x and y. douglas's research indicates that the immediate past returns will serve as reasonable estimates of future returns. a year earlier, investment x had a market value of $27 comma 000; and investment y had a market value of $46 comma 000. during the year, investment x generated cash flow of $2 comma 025 and investment y generated cash flow of $ 6 comma 770. the current market values of investments x and y are $28 comma 582 and $46 comma 000, respectively. a. calculate the expected rate of return on investments x and y using the most recent year's data. b. assuming that the two investments are equally risky, which one should douglas recommend? why?