Many factors infiluence the retail price of gasoline. The following table shows

Question

Many factors infiluence the retail price of gasoline. The following table shows the average retail price for a gallon of regular grade gasoline for each year from 2011 through 2014 (U.S. Energy Information Administration website, April 2015). Average Price ($) 3.521 3.618 3.505 3.358 Year 2011 2012 2013 2014 Round your answers to ane decimal place. a. Use 2011 as the base year and develop a price index for the retail price of a gallon of regular grade gasoline over this four-year period. 2011 2012 2013 2014 b. Use 2012 as the base year and develop a price index for the retail price of a gallon of regular grade gasoline over this four-year period. 2011 2012 2013 2014

Explanation / Answer

Price index = (Retail Price of the year of interest/Retail price of the base year)*100

(a) Base year = 2011 Retail price2011 = 3.521

(b) 2012 base year

Year Calculation Price index 2011 (3.521/3.521)*100 100 2012 (3.618/3.521)*100 102.8 2013 (3.505/3.521)*100 99.5 2014 (3.358/3.521)*100 95.4

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