Question

4. Use the following data to compute the College Price Index for 2017 using the base 1987 = 100. Item Price in 1987 Quantity per Month in 1987 Price in 2017 $25 55 Button-down shirts $10 Loafers Sneakers 10 Textbooks Jeans 12 Restaurant meals 3 35 40 3 30 14

Answer 1

Total college price in 1987 = Price in 1987*Quantity in 1987

= 10*1 + 25*1 + 10*3 + 12*12 + 12*3 + 5*11

= 10+25+30+144+36+55

= $300.

Now, let this price have an index of 100, because it is given that , we should consider 1987 as base year and the index for college price in 1987 will be 100.

Total college price in 2017 = Price in 2017 * Quantity in 1987

= 25*1 + 55*1 + 35*3 + 40*12 + 30*3 + 14*11

= 25+55+105+480+90+154

= $809.

So the index of college price in 2017 = (809/300)*100 = 269.6667

This means that the college price in 2017 is 269.6667% of the total college price in 1987.

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