Principles of Economics (Second Edition)
2nd Edition
ISBN: 9780393614077
Author: coppock, Lee; Mateer, Dirk
Publisher: W. W. Norton & Company
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Chapter 21, Problem 3QFR
To determine
To explain:
Whether an increase of 5% in prices of homes oran increase of 10% in prices of concert ticketswill have the larger impact on the
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If the prices of homes go up by 5% and the prices of concert tickets rise by 10%, which will have the larger impact on the CPI? Why?
The weight of the item such as food or housing will determine the effect of price changes on CPI
TRUE
FALSE
The "pizza connection" refers to the observation that in a major city, the cost of a slice of pizza is always about the same as the subway fare. Using the CPI values from the table
shown below and the CPI table, determine what a slice of pizza should have cost in 2009 if it cost $1.00 in 1984 and prices had risen with the CPI. What does this tell you about how
actual pizza prices changed compared to the CPI?
Year
1984 1993 1997 2002 2008 2011 2015
1.00 1.25 1.50 2.00
2.50
2.75
2.80
1.00 1.15 1.40 2.00 2.60 2.85 3.05
103.9
Click to view the CPI Table.
Pizza Cost
Subway fare
CPI
144.5 160.5 179.9 215.3 224.9
237.0
←
A slice of pizza should have cost $ in 2009 if it cost $1.00 in 1984 and prices had risen with the CPI.
(Round to the nearest cent as needed.)
Chapter 21 Solutions
Principles of Economics (Second Edition)
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Similar questions
- What is CPI? Define it and discuss why it is important.arrow_forwardThe "pizza connection" refers to the observation that in a major city, the cost of a slice of pizza is always about the same as the subway fare. Using the CPI values from the table shown below and the CPI table, determine what a slice of pizza should have cost in 2009 if it cost $1.00 in 1984 and prices had risen with the CPI. What does this tell you about how actual pizza prices changed compared to the CPI? 1984 1993 1997 2002 Year Pizza Cost 2008 2011 2015 2.50 2.75 2.80 1.00 1.25 1.50 2.00 1.00 1.15 2.00 2.60 2.85 3.05 Subway fare CPI 1.40 144.5 160.5 179.9 215.3 224.9 103.9 237.0 Click to view the CPI Table. A slice of pizza should have cost $ in 2009 if it cost $1.00 in 1984 and prices had risen with the CPI. (Round to the nearest cent as needed.) Data table C Year 1976 56.9 1977 60.6 1978 65.2 1979 72.6 1980 82.4 1981 90.9 1982 96.5 1983 99.6 1984 103.9 1985 107.6 Average Annual Consumer Price Index (1982-1984=100) CPI CPI Year CPI 1996 156.9 Year 1986 109.6 1987 113.6 1988 118.3…arrow_forwardPlease solve weeks 1 and 2 percentage of the CPI market basket.arrow_forward
- Explain the two limitations of the CPIarrow_forwarddiscuss the problems of cpiarrow_forwardOver a long period of time, the price of a candybar rose from $0.20 to $1.20. Over the same period,the CPI rose from 150 to 300. Adjusted for overallinflation, how much did the price of the candy barchange?arrow_forward
- In 2020, an adult season pass lift ticket for Devil's Head Ski Resort in Merrimac, WI costs $429. If lift ticket prices have grown proportionally to the Consumer Price Index (see table), what would a season pass have cost in the year 2014? Year CPI Index 2000 172.2 2003 184.0 2005 195.3 2009 214.5 2012 229.6 2014 236.7 2015 237.0 2016 240.0 2017 245.1 2018 251.1 2019 255.7 2020 259.9 Round your answer to the nearest whole dollar amount.arrow_forwardDescribe the three problems that make the CPI animperfect measure of the cost of living.arrow_forwardConsider the following basket of student essentials: 2019 2020 Burritos $6.30 $6.60 Pizzas $9.90 $10.00 Movie Tickets $10.00 $10.50 Energy Drinks $4.99 $5.99 a. Using 2019 as the base year, what is the CPI in 2019? b. Assume students buy 30 burritos, 25 pizzas, 15 movie tickets, and 200 energy drinks each year. What is the CPI in 2020 using 2019 as a base year? What is the inflation rate? Would this rate be higher or lower if students bought more energy drinks?arrow_forward
- What is the purpose of the "Core" CPI and how is it different from the overall CPI? Do you think that the core CPI, or "core inflation" would be useful for measuring the cost of living and for indexing wages to inflation? Why or why not?arrow_forwardThe biggest problem with constructing the CPI is that the basket of goods that the typical consumer buys keeps changing. the monetary base keeps changing the velocity of money is constant the base year is arbitraryarrow_forwardEnlighten at least two reasons of the CPI as an imperfect measure of the cost of living.arrow_forward
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