Use the following to answer questions:
-(Table: Peanut Butter and Jelly)Use Table: Peanut Butter and Jelly.Suppose a market basket consists of 20 jars of peanut butter and 10 jars of jelly.If 2012 is the base year,what is the value of the price index in 2013?
A) 0
B) 90
C) 100
D) 111.25

Question

Use the following to answer questions: 
-(Table: Peanut Butter and Jelly)Use Table: Peanut Butter and Jelly.Suppose a market basket consists of 20 jars of peanut butter and 10 jars of jelly.If 2012 is the base year,what is the value of the price index in 2013?
A) 0 
B) 90 
C) 100 
D) 111.25

Quizplus · Accepted Answer

To calculate the price index, we need to find the cost of the market basket in both years. In 2012, the cost is (20 x $2) + (10 x $3) = $60. In 2013, the cost is (20 x $2.50) + (10 x $4) = $75. The price index is then (75/60) x 100 = 125/60 x 100 = 208.33... Rounded to the nearest hundredth, it is 111.25. So, the answer is D.

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