Use the information below to answer parts (a) and (b). (Show ale-2017 Unit Price
ID: 1160285 • Letter: U
Question
Use the information below to answer parts (a) and (b). (Show ale-2017 Unit Price-2017 $4.00 1,000.00 12.00 l(b). (Show all work) Item Coffee Rent Pizza Cable Vacation Quantity 20 pounds 12 months 100 pizzas 12 months 2 weeks Unit Price-2016 $3.00 950.00 11.00 45.00 450.00 500.00 Compute the price index for each year using 2017 as the base year. (8 pts) a. b. c. What is the inflation rate between the two years? (5 pts) Would consumers be worse off if their income increased at the same rate as the inflation rate calculated in part (b). Explain. (6 pts) Assuming that the inflation rate frorn 2013 through 2015 is 6% per year, what would be the real value of a $60,000 income in each of the three years? (Show all work) (5 pts) d e. Explain what the real income for 2014 computed in part (d) means. (4 pts) t. Assuming the price index in 2010 was 87 and 92 in 2011, what was the inflation rate between 2010 and 2011? (Show all work) (5 pts)Explanation / Answer
Item
Quantity
Price-2016
2016-market basket
Price-2017
2017-market basket
Coffee
20
3
60
4
80
Rent
12
950
11400
1000
12000
Pizza
100
11
1100
12
1200
Cable
12
45
540
40
480
Vacation
2
450
900
500
1000
14000
14760
a. Price index for 2017 = (14740/14760)*100 = 100
Price index for 2016 = (14000/14760)*100 = 94.85
b. Inflation rate = (price index of 2017-price index of 2016)/price index of 2017
= ((100-94.85)/100)*100
= 5.15 percent
c. Inflation is increase in cost of living and if the salary increases with inflation rate then consumers would be better off
d. Real income = salary/(1+0.06)^n
Year
Salary
Real Income
2013
60000
56603.77
2014
60000
53399.79
2015
60000
50377.16
e. Real income in 2014 is 53399.79, as the infaltion increased it reduces the real salary
f. Infaltion = ((92-87)/87)*100 = 5.75 percent
Item
Quantity
Price-2016
2016-market basket
Price-2017
2017-market basket
Coffee
20
3
60
4
80
Rent
12
950
11400
1000
12000
Pizza
100
11
1100
12
1200
Cable
12
45
540
40
480
Vacation
2
450
900
500
1000
14000
14760
Related Questions
drjack9650@gmail.com
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.