A price relative was computed for houses. The base period is 2010. The price relative in 2015 was 140. The interpretation of the price relative is that
A) there has been a 140% increase in the price of houses from 2010 to 2015.
B) there has been a 40% increase in the price of houses from 2010 to 2015.
C) the price of houses in 2015 was $140 higher than the price in 2010.
D) It is impossible to interpret the index.

Question

Quizplus · Accepted Answer

A price relative is a measure of the price change over time relative to a base period. In this case, the base period is 2010 and the price relative in 2015 is 140. This means that the price of houses in 2015 is 40% higher than it was in 2010 (140-100=40). Option A is incorrect because a price relative is not a percentage increase, but rather a ratio of prices. Option C is incorrect because the price relative does not indicate a dollar amount. Option D is incorrect because the index can be interpreted as a measure of price change over time.

A Price Relative Was Computed for Houses