GOOD Amusement park tickets Bowling balls Camouflage neckties PRICE INCREASE LAS

Question

GOOD Amusement park tickets Bowling balls Camouflage neckties PRICE INCREASE LAST YEAR 5.0% 4.200 3.1% Refer to the table above, which gives hypothetical data on price changes for three goods. if the overall rate of inflation in the economy was 3.5%, what happened to the real price of amusement park tickets? Select one: a. The real price of amusement park tickets rose by 8.5%. b. The real price of amusement park tickets rose by 1.5%. C. The real price of amusement park tickets fell by 1.5%. d. The real price of amusement park tickets rose by 5.0%

Explanation / Answer

Correct option: C. The real price of amusement park rose by 1.5%.

Explanation: there's a simple formula to calculate real price.

Real price = Nominal price / price index *100.

Let us suppose price of amusement park tickets was 100 last year.

Price index = 100+3.5 =103.5 or 103.5/100*100=103.5

Last year price = 100

Nominal price = 100+5 = 105 .

Real price = 105/103.5*100 = 101.5 (app.)

Change in price = 101.5 - 100 = 1.5

Hence real price rose by 1.5%

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