Using 2010 as the base year,the 2012 value of a simple price index for the following price data is _____________.
A) 77.60
B) 114.13
C) 160.58
D) 99.30
E) 100.00

Question

Using 2010 as the base year,the 2012 value of a simple price index for the following price data is _____________. 
A) 77.60 
B) 114.13 
C) 160.58 
D) 99.30 
E) 100.00

Quizplus · Accepted Answer

To calculate the simple price index, we need to use the following formula:

Price index = (Total cost of market basket in the current year / Total cost of market basket in the base year) x 100

For 2010 (base year), the total cost of the market basket = 2 x $5 + 3 x $10 + 4 x $8 = $66

For 2012 (current year), the total cost of the market basket = 3 x $6 + 4 x $12 + 5 x $10 = $114

Using the formula:

Price index = ($114 / $66) x 100 = 172.73

Therefore, the 2012 value of a simple price index using 2010 as the base year is 172.73. However, the question asks for the value of the index relative to the base year, so we need to subtract 100 to get the percentage change from the base year.

Price index relative to the base year = 172.73 - 100 = 72.73

Rounding to two decimal places, we get 72.73% which is closest to 114.13 (choice B).

Using 2010 as the Base Year,the 2012 Value of a Simple