Principles of Economics 2e
2nd Edition
ISBN: 9781947172364
Author: Steven A. Greenlaw; David Shapiro
Publisher: OpenStax
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Textbook Question
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Chapter 22, Problem 1SCQ
Table 22.4 shows the fruit
Expert Solution & Answer
To determine
The amount spent on the “basket” i.e. combination of different fruits, every year.
Explanation of Solution
Economics Concept Introduction
The Price of a Basket of Goods: To determine the level of price for commodities, Economists discovered a new concept of a basket of goods and services, which consists of different types of commodities that an individual, businesses or organizations often buy. This concept looks at how the prices of commodities changed over time.
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Students have asked these similar questions
The table shows the prices of fruit purchased by the typical college student from 2001 to 2004.
What is the amount spent each year on the "basket" of fruit with the quantities shown in column
2? +
Items
Qty 2001
2002
2003
2004
Amount
Amount
Amount
Amount
Price
Price
Price
Price
Spent
Spent
Spent
Spent
Apples
Bananas
Grapes
Raspberries 1
10
S0.50
$0.75
$0.85
S0.88
12
S0.20
S0.25
S0.25
S0.29
2
$0.65
$0.70
$0.90
S0.95
$2.00
1.9
2.05
2.13
$2.13
Total
The table below details Student A's monthly purchases during 2019 and 2020. Answer the following questions writing out dollars and
cents for monetary values e.g. $1.00, item weights to two decimal places e.g. 0.10, price index values as whole numbers without
decimals, e.g. 110, and percentages to one decimal place e.g. 1.0%.
Hotdogs
Cans of Cola
Chocolate bars
Magazines
Movies
Prices ($)
2019
2.70
1.30
1.00
6.50
6.00
2020
2.80
1.25
1.00
7.50
5.75
Quantities
(# consumed per month)
2020
With 2019 as the base year this index has changed by
2019
2
16
7
3
2
1
18
7
a. The value of Student A's 2019 shopping basket using 2019 prices is $
The item weights associated with this shopping basket are
for magazines, and
for movies.
b. The value of Student A's 2019 shopping basket using 2020 prices is $
If 2019 is used as the base year, the 2020 value of Student A's price index is
2
3
for hotdogs,
for cola,
for chocolate bars,
and the 2019 value of this index is then
% between 2019 and 2020.
5. a) The table shows the prices of fruit purchased by the typical college student from 2001 to 2004. What is the
amount spent each year on the "basket" of fruit with the quantities shown in column 2?
Items
Qty. 2001
2002
2003
2004
Amount
Spent
Price
Price
Amount
Price
Amoun
Amount
Price
Spent
t Spent
Spent
Apples
Bananas
$0.50
$0.20
$0.65
$2.00
10
$0.75
$0.25
$0.70
$0.85
$0.25
$0.90
2.05
$0.88
$0.29
$0.95
12
Grapes
Raspberries 1
Total
Price Index
Inflation
2.
1.9
2.13
Rate
b) Construct the price index for a "fruit basket" in each year using 2003 as the base year.
c) Compute the inflation rate for fruit prices from 2001 to 2004.
Who in an economy is the big winner from inflation and why?
Chapter 22 Solutions
Principles of Economics 2e
Ch. 22 - Table 22.4 shows the fruit prices that the typing...Ch. 22 - Construct the price index for a fruit basket in...Ch. 22 - Compute the inflation rate for fruit prices from...Ch. 22 - Edna is living in a retirement home where home...Ch. 22 - How to Measure Changes in the Cost of Living...Ch. 22 - The Consumer Price Index is subject to the...Ch. 22 - Go to this website...Ch. 22 - If inflation rises unexpectedly by 5, would a...Ch. 22 - How should an increase in inflation affect the...Ch. 22 - A fixed-rate mortgage has the same interest rate...
Ch. 22 - How do economists use a basket of goods and...Ch. 22 - Why do economists use index numbers to measure the...Ch. 22 - What is the difference between the price level and...Ch. 22 - Why does substitution bias arise if we calculate...Ch. 22 - Why does the quality/new goods bias arise if we...Ch. 22 - What has been a typical range of inflation in the...Ch. 22 - Over the last century, during what periods was the...Ch. 22 - What is deflation?Ch. 22 - Identity several parties likely to he helped and...Ch. 22 - What is indexing?Ch. 22 - Name several forms of indexing in the private and...Ch. 22 - Inflation rates, like most statistics, are...Ch. 22 - Given the federal budget deficit in recent years,...Ch. 22 - Why is the GDP deflator not an accurate measure of...Ch. 22 - Imagine that the government statisticians who...Ch. 22 - Describe a situation, either a government policy...Ch. 22 - Describe a situation, either a government policy...Ch. 22 - Why do you mink the U.S. experience with inflation...Ch. 22 - If, over time, wages and salaries on average rise...Ch. 22 - Who in an economy is the big winner from...Ch. 22 - If a government gains from unexpected inflation...Ch. 22 - Do you think perfect indexing is possible? Why or...Ch. 22 - The index number representing the price level...Ch. 22 - The total price of purchasing a basket of goods in...Ch. 22 - With in 1 or 2 percentage points, what has the...Ch. 22 - If inflation rises unexpectedly by 5, indicate for...Ch. 22 - Rosalie the Retiree knows that when she retires in...
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