Suppose the price index is 100 in the base year and the price of a pound of oranges in that year is $1.96.Now, if the price index changes to 105 in the following year, how much would a pound of oranges cost?
A)$2.45
B)$0.25
C)$1.96
D)$2.06
E)$1.50

Question

Quizplus · Accepted Answer

To solve the problem, we can use the formula:

Price in current year = Price in base year x (Current year index/ Base year index)

Plugging in the values, we get:

Price in current year = $1.96 x (105/100) = $2.058

Rounding this to the nearest cent, we get $2.06, which is option D.

Suppose the Price Index Is 100 in the Base Year