Suppose that the market basket for the university student price index (USPI) consists of 4 textbooks and 100 gallons of gasoline. In 2010, the base year for this index, textbooks cost $50 each and gas costs $1 per gallon. In 2011, textbooks still cost $50 each and gasoline costs $4 per gallon. The USPI for 2011 is:
A)250.
B)200.
C)150.
D)100.

Question

Quizplus · Accepted Answer

To calculate the USPI for 2011, we need to first calculate the cost of the market basket in both years.

In 2010, the cost of the market basket was:

4 textbooks * $50 per textbook = $200 for textbooks
100 gallons of gasoline * $1 per gallon = $100 for gas
Total cost of market basket = $200 + $100 = $300

In 2011, the cost of the market basket was:

4 textbooks * $50 per textbook = $200 for textbooks
100 gallons of gasoline * $4 per gallon = $400 for gas
Total cost of market basket = $200 + $400 = $600

To calculate the USPI, we divide the cost of the market basket in 2011 by the cost of the market basket in the base year (2010) and multiply by 100:

(600 / 300) * 100 = 200

Therefore, the USPI for 2011 is 200. The correct answer is B.

Suppose That the Market Basket for the University Student Price