Assuming food and beverages make up about 15 percent of total expenditures and food and beverage prices rise by 10 percent while the other components of the price index remain constant, approximately by how much will the price index rise?

Question

Quizplus · Accepted Answer

The price index will rise by 1.5 percent because food and beverages make up 15 percent of total expenditures, and a 10 percent increase in their prices results in a 1.5 percent increase in the overall price index (0.15 * 10% = 1.5%).

Assuming Food and Beverages Make Up About 15 Percent of Total