Table 5-2 shows the market basket for a typical college student. Use this data to answer questions .
Table 5-2

-Refer to Table 5-2. Suppose the base year is 2007. What is the value of the price index in 2008?

Question

Table 5-2 shows the market basket for a typical college student. Use this data to answer questions .
Table 5-2
 
-Refer to Table 5-2. Suppose the base year is 2007. What is the value of the price index in 2008?

Quizplus · Accepted Answer

To find the price index, we need to calculate the cost of the market basket in the current year (2008) and divide it by the cost of the market basket in the base year (2007) and multiply by 100.

The cost of the market basket in 2007 is $40.70 (5 x $2.50 + 15 x $0.80 + 5 x $1.20 + 2 x $3.00 + 2 x $0.75 + $2.50).

The cost of the market basket in 2008 is $46.40 (5 x $3.00 + 15 x $1.00 + 5 x $2.00 + 2 x $4.00 + 2 x $1.00 + $2.50).

The price index in 2008 is (46.40/40.70) x 100 = 1.14, so the correct answer is B.

Table 5-2 Shows the Market Basket for a Typical College