Concept explainers
To find: Each year’s tuition for Colorado residents at the University of Colorado in constant 1985 dollars by using annual average consumer price index (CPI).
Answer to Problem 25E
Solution: The required each year’s tuition in constant 1985 dollars is shown below:
Year | Tuition | CPI | Adjusted Tuition ($) |
1985 | $1,332 | 107.6 | 1332 |
1987 | $1,548 | 113.6 | 1406 |
1989 | $1,714 | 124.0 | 1535 |
1991 | $1,972 | 136.2 | 1686 |
1993 | $2,122 | 144.5 | 1789 |
1995 | $2,270 | 152.4 | 1887 |
1997 | $2,356 | 160.5 | 1987 |
1999 | $2,444 | 166.6 | 2062 |
2001 | $2,614 | 177.1 | 2192 |
2003 | $3,192 | 184.0 | 2278 |
2005 | $4,446 | 195.3 | 2418 |
2007 | $5,418 | 207.3 | 2566 |
2009 | $6,446 | 214.5 | 2655 |
2011 | $7,672 | 224.9 | 2784 |
2013 | $8,760 | 233.0 | 2884 |
2015 | $9,312 | 238.7 | 2955 |
Explanation of Solution
Given: The tuition for Colorado residents at the University of Colorado is provided and the annual average consumer price index (CPI) is obtained from the table 16.1, for the respective years which are shown below:
Year | Tuition ($) | CPI |
1985 | 1332 | 107.6 |
1987 | 1548 | 113.6 |
1989 | 1714 | 124.0 |
1991 | 1972 | 136.2 |
1993 | 2122 | 144.5 |
1995 | 2270 | 152.4 |
1997 | 2356 | 160.5 |
1999 | 2444 | 166.6 |
2001 | 2614 | 177.1 |
2003 | 3192 | 184.0 |
2005 | 4446 | 195.3 |
2007 | 5418 | 207.3 |
2009 | 6446 | 214.5 |
2011 | 7672 | 224.9 |
2013 | 8760 | 233.0 |
2015 | 9312 | 238.7 |
Calculation:
The formula to convert the amount from one period to another period is shown below:
Here, time B represents the present time and time A represents the base time.
Now, convert 1987 tuition in 1985 dollars as shown below:
Also, convert 1989 tuition in 1985 dollars as shown below:
Similarly, calculated each year’s tuition in constant 1985 dollars is shown below in the tabular manner:
Year | Tuition | CPI | Adjusted Tuition ($) |
1985 | $1,332 | 107.6 | 1332 |
1987 | $1,548 | 113.6 | 1406 |
1989 | $1,714 | 124.0 | 1535 |
1991 | $1,972 | 136.2 | 1686 |
1993 | $2,122 | 144.5 | 1789 |
1995 | $2,270 | 152.4 | 1887 |
1997 | $2,356 | 160.5 | 1987 |
1999 | $2,444 | 166.6 | 2062 |
2001 | $2,614 | 177.1 | 2192 |
2003 | $3,192 | 184.0 | 2278 |
2005 | $4,446 | 195.3 | 2418 |
2007 | $5,418 | 207.3 | 2566 |
2009 | $6,446 | 214.5 | 2655 |
2011 | $7,672 | 224.9 | 2784 |
2013 | $8,760 | 233.0 | 2884 |
2015 | $9,312 | 238.7 | 2955 |
Interpretation: From the above table, it can be concluded that the adjusted tuition is increased as the CPI increased when the adjustment is done by taking the year 1985 as base.
To graph: The line plot of actual dollar tuition and constant dollars tuition on the same axes for the respective years.
Explanation:
Graph: The value of constant tuition dollar by taking 1985 dollars for the remaining years are obtained in the previous part. With the help of Excel, the two-line plots are obtained for the adjusted minimum wages and the minimum wages in constant dollars as shown below:
Step 1: Enter the data of actual tuition dollar and the constant dollar tuition during the respective years in the spreadsheet of Excel. The data is shown below:
Year | Tuition | Adjusted Tuition ($) |
1985 | $1,332 | $1,332 |
1987 | $1,548 | $1,406 |
1989 | $1,714 | $1,535 |
1991 | $1,972 | $1,686 |
1993 | $2,122 | $1,789 |
1995 | $2,270 | $1,887 |
1997 | $2,356 | $1,987 |
1999 | $2,444 | $2,062 |
2001 | $2,614 | $2,192 |
2003 | $3,192 | $2,278 |
2005 | $4,446 | $2,418 |
2007 | $5,418 | $2,566 |
2009 | $6,446 | $2,655 |
2011 | $7,672 | $2,784 |
2013 | $8,760 | $2,884 |
2015 | $9,312 | $2,955 |
Step 2: Select the data, click on Insert, and select the Line chart as shown below:
Step 3: The two line plots showing actual tuition dollar, and the constant dollar tuition is obtained as shown below:
Interpretation: From the above two line plots on the same axes, it can be concluded that the constant dollar tuition has risen steadily from the year 1985 to the year 2015 but the actual dollar tuition for these years has increases sharply. So, it can be observed from the graph that the actual dollar tuition is increasing faster than the constant tuition dollar during the period 1985 to 2015.
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Chapter 16 Solutions
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