Assume tuition at Penn State cost $6,142 (per semester)in 2007 and $7,562 in 2012.If the price index was 207.34 in 2007 and 226 in 2012,then we could say tuition
A) has increased more slowly than inflation.
B) has increased more rapidly than inflation.
C) has increased at about the same rate as inflation.
D) is an inferior good.
E) suffers from menu costs due to inflation.

Question

Quizplus · Accepted Answer

The price index increased from 207.34 to 226 between 2007 and 2012, indicating an inflation rate of approximately 9%. Meanwhile, the tuition increased from $6,142 to $7,562, which is an increase of approximately 23%. Therefore, tuition has increased at a faster rate than inflation.

Assume Tuition at Penn State Cost $6,142 (Per Semester)in 2007