Economics Homework Help

Central Virginia Community College Informatics Information Economics Question

 

I’m stuck on a Information Economics question and need an explanation.

Consider a consumer who wants to consume only two commodities and has an income of $100. Assume the price of good 1 is $10 per unit and the price of good 2 is $20 per unit. Now, inflation causes the price of good 1 to increase to $20 per unit, while the price of good 2 increases to $25 per unit. On the other hand, the consumer also gets a raise of $100 (so her new income is $200). Is she better off or worse off?