Foundations of Economics (8th Edition)
8th Edition
ISBN: 9780134486819
Author: Robin Bade, Michael Parkin
Publisher: PEARSON
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Chapter 23, Problem 9SPPA
To determine
To find:
The percentage by which the prices of other items change in the
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Covid 19 pandemic has forced the people in the economy Love & Laughter, to consume only 2 goods, food, and clothing. The CPI is derived from the market basket of goods which consists of 25 units of food and 5 units of clothing.
FOOD
Clothing
2018 price per unit
$8
$20
2019 price per unit
$12
$40
1. What are the percentage increases in the price of food and in the price of clothing?
2. What is the percentage increase in the CPI?
3. Do these price changes affect all consumers to the same extent? Explain.
The table shows the quantities of the goods Suzie bought and the prices she paid during
two consecutive weeks.
Suzie's CPI market basket contains the goods she bought in Week 1.
Calculate the cost of Suzie's CPI market basket in Week 1 and in Week 2.
What percentage of the CPI market basket is gasoline?
Calculate the value of Suzie's CPI in Week 2 and her inflation rate in week 2.
The cost of Suzie's CPI market basket in Week 1 is $
>>> Answer to 2 decimal places.
m
Week 1
Item
Coffee
Books
Gasoline
Week 2
Item
Coffee
Books
Gasoline
Concert
Quantity
8 cups
1
25 gallons
Quantity
8 cups
4
15 gallons
1 ticket
Price
$4.00 a cup
$25.00 each
$2.00 a gallon
Price
$4.00 a cup
$12.50 each
$2.50 a gallon
$95 each
The table shows the quantities of the goods Suzie
bought and the prices she paid during two consecutive
weeks.
Suzie's CPI market basket contains the goods she
bought in Week 1.
Calculate the cost of Suzie's CPI market basket in Week
1 and in Week 2.
What percentage of the CPI market basket is gasoline?
Calculate the value of Suzie's CPI in Week 2 and her
inflation rate in week 2.
The cost of her CPI market basket in Week 2 is $ 95.75.
>>> Answer to 2 decimal places.
Gasoline is 36.3 percent of the CPI market basket.
>>> Answer to 1 decimal place.
Week 1
Item
The cost of Suzie's CPI market basket in Week 1 is $ 103.25.
>>> Answer to 2 decimal places.
The value of Suzie's CPI in Week 2 is
>>> Answer to 1 decimal place.
Coffee
Books
Gasoline
Week 2
Item
Coffee
Books
Gasoline
Concert
Quantity
13 cups
1
15 gallons
Quantity
13 cups
2
5 gallons
1 ticket
Price
$2.75 a cup
$30.00 each
$2.50 a gallon
Price
$2.75 a cup
$15.00 each
$3.00 a gallon
$95 each
Chapter 23 Solutions
Foundations of Economics (8th Edition)
Ch. 23 - Prob. 1SPPACh. 23 - Prob. 2SPPACh. 23 - Prob. 3SPPACh. 23 - Prob. 4SPPACh. 23 - Prob. 5SPPACh. 23 - Prob. 6SPPACh. 23 - Prob. 7SPPACh. 23 - Prob. 8SPPACh. 23 - Prob. 9SPPACh. 23 - Prob. 10SPPA
Ch. 23 - Prob. 1IAPACh. 23 - Prob. 2IAPACh. 23 - Prob. 3IAPACh. 23 - Prob. 4IAPACh. 23 - Prob. 5IAPACh. 23 - Prob. 6IAPACh. 23 - Prob. 7IAPACh. 23 - Prob. 8IAPACh. 23 - Prob. 9IAPACh. 23 - Prob. 10IAPACh. 23 - Prob. 1MCQCh. 23 - Prob. 2MCQCh. 23 - Prob. 3MCQCh. 23 - Prob. 4MCQCh. 23 - Prob. 5MCQCh. 23 - Prob. 6MCQCh. 23 - Prob. 7MCQCh. 23 - Prob. 8MCQ
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Similar questions
- The current nominal price of a gallon of gasoline is $3.83 and the CPI is 304.4. In 1980 the CPI was 82.4. Convert today's nominal price of gasoline to the prices of 1980. Be sure to show your calculations.arrow_forwardInsurance and pensions 11.9% Item a. Entertainment b. Transportation c. Clothing Housing 32.8% Entertainment 5.3% Source: U.S. Bureau of Labor Statistics, Consumer Expenditure Survey (2018 data). 0.053 0.159 0.03 Transportation 15.9% Health care 8.1% Use the item weights in the figure to determine the percentage change in the CPI that would result from a(n) a. 20 percent increase in entertainment prices. b. 8 percent decrease in transportation costs. c. doubling of clothing prices. (Note: Review the table titled "Computing Changes in the CPI" in your text for assistance.) Instructions: Enter your responses as a percentage rounded to two decimal places. If you are entering any negative numbers be sure to include a negative sign (-) in front of those numbers. Item Weight Price Change (Inflation Effect) Impact on CPI 20% -8% 100% Food 12.9% Clothing 3.0% Miscellaneous 10.1%arrow_forwardUse the information in the table to calculate a consumer price index (CPI) and the inflation rate. The base year is 1975. Round answers to two decimal places. Market basket Quantity 1975 prices 1976 prices A dozen eggs 29 $1.10 $1.70 Calculator 19 $15.00 $17.00 Microwave oven 9 $180.00 $230.00 What is the CPI for 1975?arrow_forward
- The weight of the item such as food or housing will determine the effect of price changes on CPI TRUE FALSEarrow_forwardUse the information in the table to calculate a consumer price index (CPI) and the inflation rate. The base year is 1975. Round answer to two decimal places. Market basket Quantity 1975 prices 1976 prices A dozen eggs 21 $0.50 $0.90 Calculator 11 $10.50 $14.00 Microwave oven 2 $130.00 $150.00 What is the CPI for 1975? What is the CPI for 1976? What is the inflation rate for 1976?arrow_forwardIn a simple economy, people consume only two goods: food and clothing. The market basket of goods used to compute the CPI has 50 units of food and 10 units of clothing. Food Clothing Last year's price $4 $8 This year's price $6 $16 a. What are the percentage increases in the price of food and in the price of clothing? b. What is the percentage increase in the CPI? c. Do these price changes affect all consumers to the same extent? Explainarrow_forward
- Over 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_forwardUse the information in the table to calculate a consumer price index (CPI) and the inflation rate. The base year is 1975. Rou answers to two decimal places. Market basket Quantity 1975 prices 1976 prices A dozen eggs 29 $1.10 $1.70 Calculator 19 $15.00 $17.00 Microwave oven 9. $180.00 $230.00 What is the CPI for 1975? 100 What is the CPI for 1976? 126.82 What is the inflation rate for 1976? Enter numeric value Incorrectarrow_forward7) In 2010, a bottle of Coke cost $1. In 2020, it would cost $1.50. The CPI for 2020 was 260 and the CPI for 2010 was 220. Which of the following statements is correct? A) The real price of Coke stayed the same. B) The real price of Coke decreased. C) The real price of Coke increased. D) The nominal price of Coke stayed the same.arrow_forward
- The price tag on a tennis ball in 1975 read $0.10, and the price tag on a tennis ball in 2005 read $1.00. The CPI in 1975 was 52.3, and the CPI in 2005 was 191.3. Refer to Scenario 24-1. The price of a 1975 tennis ball in 2005 dollars is Question 2 options: $0.03. $0.27. $0.37. $1.00.arrow_forwardYear Price of a pound of Bacon (10 units) Price of a dozen Eggs (15 units) Price of a pound of Coffee (20 units) $5.50 $1.75 $4.00 $5.25 $2.00 $4.50 3. $5.50 $2.00 $5.00 Use the information in the table above to calculate the CPI in Year 2, using Year 1 as the base year. Round to the nearest whole number.arrow_forwardDescribe the three problems that make the CPI animperfect measure of the cost of living.arrow_forward
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