Consider a fictional price index, the College Student Price Index (CSPI), based
ID: 1134443 • Letter: C
Question
Consider a fictional price index, the College Student Price Index (CSPI), based on a typical college student's annual purchases. Suppose the following table shows information on the market basket for the CSPI and the prices of each of the goods in 2014, 2015, and 2016. The cost of each item in the basket and the total cost of the basket are shown for 2014. Perform these same calculations for 2015 and 2016, and enter the results in the following table 2014 2015 2016 Price Price Cost Price Cost Quantity in Basket (Dollars) (Dollars) (llars) (ollars) (llrs) (ollars) 15 100 Calculators Large coffees Energy drinks Textbooks 250 100 10 120 150 180 100 Price index Suppose the base year for this price index is 2014 In the last row of the table, calculate and enter the value of the CSPI for the remaining years Between 2014 and 2015, the CSPI increased b %. Between 2015 and 2016, the CSPI increased byExplanation / Answer
Answer:
Items
Quantity in basket
2015
Price $ Cost $
2016
Price $ cost $
Notebooks
15
5
75
8
120
Calculators
1
100
100
130
130
Large coffees
250
2
500
2
500
Energy drinks
50
4
200
6
300
Textbooks
10
150
1500
180
1800
Total cost
2,375
2850
price index
125
150
Cost = quantity in basket * price
Base year is given as 2014 and its cost of market basket is =1900
Price index = total cost of market basket of the year (whose price index we have to calculate ) / cost of base year * 100
Price index 2015 = 2,375/ 1900 *100 = 125
Price index of 2016 = 2850 / 1900 * 100 = 150
Between 2014 and 2015 the CSPI increased by : 25%
Explanation:
Percentage increased by = difference between price index of 2015 and 2014 /price index of 2014 * 100
= 125-100/100 *100 = 25/100*100 = 25%
Between 2015 to 2016 CSPI increased by : 20%
Explanation :
CSPI increased % = 150 – 125 /125 * 100
= 25/125 * 100
= 20%
The following will illustrate why price indexes such as the CSPI might overstate inflation in the cost of going to college:
Items
Quantity in basket
2015
Price $ Cost $
2016
Price $ cost $
Notebooks
15
5
75
8
120
Calculators
1
100
100
130
130
Large coffees
250
2
500
2
500
Energy drinks
50
4
200
6
300
Textbooks
10
150
1500
180
1800
Total cost
2,375
2850
price index
125
150
Related Questions
drjack9650@gmail.com
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.