Consider that in 2015, the average college student in the US purchased 99 textbo

Question

Consider that in 2015, the average college student in the US purchased 99 textbooks at a price of $90 per book and enrolled in 25 credit hours of classes at a price of $350 per credit hour. In 2016, the average student continued to purchase 9 textbooks and enroll in 25 credit hours, but the price of one textbook rose to $110 per book, and the tuition price increased to $390 per credit hour. The base year for computing a "student price index" using this information is 2015. What is the value of the student price index in 2015?

Explanation / Answer

Year 2015:

Textbooks : 99 textbook at the price of $90 per book.

Class Hours : 25 credit hours at the price of $350 per credit Hour.

Year 2016:

Textbooks : 9 textbooks at the price of $110 per book.

Class hours : 25 credit hours at the price of $390 per hour

Student Price Index can be computed as follows:

Taking 2015 prices, total expenditure in year 2015 = 99*90 + 25*350 = 17,660

Taking 2015 prices as base, and 2015 quantities and Price of year 2016, expenditure in 2016 taking 2015 base quantities = 99*110 + 25*390 = 20640

Taking 2015 s base year, so price index in 2015 =100.

Then Student Price index in year 2016 = (20640 / 17660 )*100 = 116.8

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