A consumer expenditure survey reports the following information on entertainment spending: $\begin{array}{c}
\quad\quad\quad\quad2005 \quad\quad\quad \quad\quad\quad2006\
\begin{array}{|l|c|c|c|c|}
\hline & \text { Price } & \text { Quantity } & \text { Price } & \text { Quantity } \
\hline \text { Movies } & \$ 7 & 5 & \$ 8 & 7 \
\hline \text { Concerts } & \$ 30 & 2 & \$ 35 & 2 \
\hline \text { CDs } & \$ 16 & 7 & \$ 15 & 10 \
\hline
\end{array}\end{array}$
Using 2005 as the base year,by how much does a "cost of entertainment" index increase between 2005 and 2006?
A)3.86%
B)8.65%
C)13.43%
D)29.41%

Question

Quizplus · Accepted Answer

The "cost of entertainment" index is a weighted average of the prices of the three entertainment items, with the weights being the quantities purchased in the base year. The index in 2005 is:$$(7 	imes 5) + (30 	imes 2) + (16 	imes 7) = 235$$The index in 2006 is:$$(8 	imes 7) + (35 	imes 2) + (15 	imes 10) = 245$$The percentage increase in the index is:$$\frac{245 - 235}{235} 	imes 100 = 3.86%$$

A Consumer Expenditure Survey Reports the Following Information on Entertainment