1. Calculating inflation using a simple price index Consider a fictional price i
ID: 1108098 • Letter: 1
Question
1. Calculating inflation using a simple price index 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 Cost Price Cost Price Cost Quantity in Basket (Dollars) (Dollars) (Dollars) (Dollars) (Dollars) (Dollars) Notebooks Calculators Large coffees Energy drinks Textbooks Total cost Price index 10 50 100 150 100 1,000 1,400 100 5 100 110 140 150 50 10 2 100 120 150 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.Explanation / Answer
price index relative to 2014
=(Total cost of basket in 2015/total cost of basket in 2014)*100
price index relative to 2014
=(Total cost of basket in 2016/total cost of basket in 2014)*100
Price(2015) Cost 2015=Price in 2015 * quantity in basket 7 7*10=70 110 110*1=110 1 1*150=150 3 3*50=150 120 120*10=1200 Total cost =70+110+150+150+1200=1680price index relative to 2014
=(Total cost of basket in 2015/total cost of basket in 2014)*100
=(1680/1400)*100=120Related Questions
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