Exhibit 18-2 Assume that 2010 is the base year with a price index of 100 and that one of each good is included in the market basket.
Refer to Exhibit 18-2.What would the price index equal in 2011?

Question

Exhibit 18-2 Assume that 2010 is the base year with a price index of 100 and that one of each good is included in the market basket.
 Refer to Exhibit 18-2.What would the price index equal in 2011?

Quizplus · Accepted Answer

To calculate the price index for the year 2011, we need to sum the prices of all goods in 2011 and divide it by the sum of prices of all goods in the base year (2010), then multiply by 100.

For example, the price of good A in 2011 is $4.50, which is 10% higher than the price in 2010 ($4.10). So, the relative price in 2011 is 110. Similarly, we can calculate the relative prices for all goods in 2011.

The sum of relative prices in 2011 is:
110 + 90 + 120 + 130 + 85 = 535

The sum of relative prices in 2010 is:
100 + 100 + 100 + 100 + 100 = 500

So, the price index for 2011 is 535/500 * 100 = 113.2. Therefore, the correct answer is (C).

Exhibit 18-2 Assume That 2010 Is the Base Year with a Price