The consumption bundle and prices for years 0 and 1 for Sam are shown below:

Item Q0 P0 Q1 P1

Wine 45 $5.00 60 $3.50

Bread 120 $2.00 90 $2.50

a. Using the market basket in year 0 and setting the CPI for year 0 = 1.00, calculate the CPI for year 1

b. Graph the year 0 and year 1 budget constraints. Label the year 0 constraint A and the year 2 constraint B.

c. In which year was Sam better off? How can you tell?

d. Using the market basket in year 1 and pricing it out in year 0 and year 1 prices, what would the value of the CPI be in year 1? (assume the prices in year 0 are set = 1.00 for the CPI)