Assume a market basket includes three avocados, two loaves of bread, a dozen eggs, and a seasoning packet. According to the table shown, what is the change in the price level between the base year and the current year?

Question

Assume a market basket includes three avocados, two loaves of bread, a dozen eggs, and a seasoning packet.  According to the table shown, what is the change in the price level between the base year and the current year?

Quizplus · Accepted Answer

To find the change in the price level, we need to calculate the cost of the market basket in the base year and the current year. Using the table, we can see that the cost of the market basket in the base year is $8.50 (2.00 x 2 + 1.00 x 3 + 1.50 x 1) and in the current year, it's $9.15 (2.25 x 2 + 1.25 x 3 + 1.75 x 1). Then, we can use the formula:

Price level = (Cost of market basket in current year / Cost of market basket in base year) x 100

Price level = (9.15 / 8.50) x 100 = 107.6

So, the change in the price level between the base year and the current year is 7.6 percent. Therefore, the best choice is C (7.7 percent), which is the closest option to 7.6 percent.

Assume a Market Basket Includes Three Avocados, Two Loaves of Bread