Suppose that a market basket used to construct a university student price index (USPI) consists of 5 textbooks and 100 gallons of gasoline. In 2018, the base year, textbooks cost $100 each, and gasoline costs $2 per gallon. In 2019, textbooks cost $120 each, and gasoline costs $3 per gallon. The USPI for 2019 is:
A)120.4
B)120.4.
C)900.3
D)900.3.
E)128.6
F)128.6.
G)707.9
H)707.9.

Question

Quizplus · Accepted Answer

To calculate the USPI for 2019, first find the cost of the market basket in both years. In 2018, the cost is (5 textbooks * $100) + (100 gallons * $2) = $500 + $200 = $700. In 2019, the cost is (5 textbooks * $120) + (100 gallons * $3) = $600 + $300 = $900. The USPI is (Cost in 2019 / Cost in 2018) * 100 = ($900 / $700) * 100 = 128.6.

Suppose That a Market Basket Used to Construct a University