Attempts: 1-T-) Keep the Highest: /3 1. Calculating inflation using a simple pri

Question

Attempts: 1-T-) Keep the Highest: /3 1. Calculating inflation using a simple price Index Consider a fictional price Index, the College Student Price Index (CSPD, 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 Cost Price Cost Price Cost Quantity in Basket (Dollars) (Dollars) (Dollars) (Dollars) (Dollars)(Dollars) 15 30 Notebooks Calculators Large coffees Energy drinks Textbooks Total cost Price index 100 130 250 100 1,200 1,900 100 10 120 150 180

Explanation / Answer

Cost in 2015 = Price in 2015 x Quantity in Basket

Between 2014 and 2015:

CSPI increased by; (125 - 100)/100 x 100 = 25%

Between 2015 and 2016:

CSPI increased by; (150 - 120)/120 x 100 = 25%

1) Professors required each student to buy 15 notebooks, regardless of the price.

Quantity in basket 2015 2015 2016 2016 Price Cost Price Cost Notebooks 15 5 15 x 5 = 75 8 15 x 8 = 120 Calculators 1 100 1 x 100 = 100 130 1 x 130 = 130 Large Coffees 250 2 250 x 2 = 500 2 250 x 2 = 500 Energy drinks 50 4 50 x 4 = 200 6 50 x 6 = 300 Textbooks 10 150 10 x 150 = 1500 180 10 x 180 = 1800 Total Cost 2375 2850 Price index 2375/1900 x 100 = 125 2850/1900 x 100 = 150

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