Question

US Homework (Ch 24) Perform the same calculations for 2018 and 2019, and enter the results in the following table. 2017 2018 Price Cost Cost Dollars) Price Dollars) Quantity in Basket (Dollars) Price Dollars Cost Dollars) Dallars) Notebooks 15 Calculators Large coffees 500 Energy drinks Textbooks 10 150 Total cost 1.200 1.900 100 Price Index Suppose the base year for this price index is 2017. in the last row of the table, calculate and the value of the CSP for the remaining years. Between 2017 and 2018, the CSPI increased by % Between 2018 and 2019, the CSPI increased by Which of the following, if true, would illustrate why price indexes such as the CSPI might overstale inflation in the cost of going to college? Check all that apply. A new mobile device for personal computing became available for purchase. Professors required each student to buy 10 textbooks, regardless of the price. Energy drinks became increasingly popular on college campuses between 2017 and 2019 due to significant improvements in flavor, but this quality change is hard to measure As the price of calculators rose, fewer students decided to buy them, opting instead to use the free calculators in their cell phones or on their computers.

Answer 1

		2017	2018	2019
	Quantity in Basket	Price ($)	Cost ($)	Price ($)	Cost ($)	Price ($)	Cost ($)
Notebooks	15	2	30	5	75	8	120
Calculators	1	70	70	100	100	130	130
Large Coffee	250	2	500	2	500	2	500
Energy drinks	50	2	100	4	200	6	300
Textbooks	10	120	1200	150	1500	180	1800
Total cost			1900		2375		2850
Price index			100		125		150

Cost = quantity in basket * Price

Price index = (Cost of a basket in a given year / Cost of a basket in a base year)

Base year is 2017.

The price index is a measure of CSPI.

% change in CSPI between 2017 and 2018 = [(Price index 2018 - Price index 2017) / Price index 2017] *100

% change in CSPI between 2017 and 2018 = [(125 - 100) / 100]*100

% change in CSPI between 2017 and 2018 = 25

% change in CSPI between 2018 and 2019 = [(Price index 2019 - Price index 2018) / Price index 2018] *100

% change in CSPI between 2018 and 2019 =[(150 - 125) /125] * 100

% change in CSPI between 2018 and 2019 = 20.

Between 2017 and 2018, the CSPI increased by 25%. Between 2018 and 2019, the CSPI increased by 20%

The following would illustrate why price indexes such as CSPI might overstate inflation in the cost of going to college.

A new mobile device for personal computing became available for purchase.

Energy drinks became increasingly popular on college campuses between 2017 and 2019 due to significant improvements in flavor, but this quality change is hard to measure.

As the price of calculators rose, fewer students decided to buy them, opting instead to use the free calculators in their cell phones or on their computers.

Answer: Option (1), (2) and (4).