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:
A) tuition has increased more slowly than inflation.
B) tuition has increased more rapidly than inflation.
C) tuition has increased at about the same rate as inflation.
D) tuition is an inferior good.
E) tuition suffers from menu costs due to inflation.

Question

Quizplus · Accepted Answer

To determine if tuition has increased more rapidly than inflation, we need to compare the percentage increase in tuition to the percentage increase in the price index.

Percentage increase in tuition = ((7,562 - 6,142)/6,142) x 100% = 23.09%
Percentage increase in price index = ((226 - 207.34)/207.34) x 100% = 8.99%

Since the percentage increase in tuition (23.09%) is much higher than the percentage increase in the price index (8.99%), we can say that tuition has increased more rapidly than inflation. Therefore, the correct answer is B.

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