Consider a fictional price index, the College Student Price Index (CSPI), based on a typical college student's annual purchases. Suppose the following table shows information on the market basket for the CSPI and the prices of each of the goods in 2017, 2018, and 2019. The cost of each item in the basket and the total cost of the basket are shown for 2017. Perform these same calculations for 2018 and 2019, and enter the results in the following table. 2017 2018 2019 Price Cost Price Cost Price Cost Quantity in Basket (Dollars) (Dollars) (Dollars) (Dollars) (Dollars) (Dollars) Notebooks 10 3 30 3 4 Calculators 1 75 75 80 104 Large coffees 300 2 600 2 Energy drinks 75 150 4 5 Textbooks 90 720 110 120 Total cost 1,575 Price index 100 Suppose the base year for this price index is 2017. In the last row of the table, calculate and enter the value of the CSPI 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 overstate inflation in the cost of going to college? Check all that apply. O Professors required each student to buy 10 notebooks, regardless of the price. O As the price of energy drinks increased relative to the price of coffee between 2017 and 2019, students decreased their consumption of energy drinks and increased their consumption of coffee. n A new type of personal transporter, which made it easier to get around places like university campuses, became available for purchase. O The quality of textbooks increased dramatically from 2017 to 2019, with textbook companies bundling new online study aids with their books, but this quality change is hard to measure.
Consider a fictional price index, the College Student Price Index (CSPI), based on a typical college student's annual purchases. Suppose the following table shows information on the market basket for the CSPI and the prices of each of the goods in 2017, 2018, and 2019. The cost of each item in the basket and the total cost of the basket are shown for 2017. Perform these same calculations for 2018 and 2019, and enter the results in the following table. 2017 2018 2019 Price Cost Price Cost Price Cost Quantity in Basket (Dollars) (Dollars) (Dollars) (Dollars) (Dollars) (Dollars) Notebooks 10 3 30 3 4 Calculators 1 75 75 80 104 Large coffees 300 2 600 2 Energy drinks 75 150 4 5 Textbooks 90 720 110 120 Total cost 1,575 Price index 100 Suppose the base year for this price index is 2017. In the last row of the table, calculate and enter the value of the CSPI 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 overstate inflation in the cost of going to college? Check all that apply. O Professors required each student to buy 10 notebooks, regardless of the price. O As the price of energy drinks increased relative to the price of coffee between 2017 and 2019, students decreased their consumption of energy drinks and increased their consumption of coffee. n A new type of personal transporter, which made it easier to get around places like university campuses, became available for purchase. O The quality of textbooks increased dramatically from 2017 to 2019, with textbook companies bundling new online study aids with their books, but this quality change is hard to measure.
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Transcribed Image Text:**College Student Price Index (CSPI): An Analysis**
Consider a fictional price index, the College Student Price Index (CSPI), based on a typical college student's annual purchases. The table below provides information on the market basket for the CSPI and the prices of each of the goods in 2017, 2018, and 2019. The cost of each item in the basket and the total cost of the basket are shown for 2017.
**Basket Composition and Prices:**
| Quantity in Basket | 2017 Price (Dollars) | 2017 Cost (Dollars) | 2018 Price (Dollars) | 2018 Cost (Dollars) | 2019 Price (Dollars) | 2019 Cost (Dollars) |
|--------------------|----------------------|---------------------|----------------------|---------------------|----------------------|---------------------|
| Notebooks | 10 | 3 | 30 | 3 | | 4 | |
| Calculators | 1 | 75 | 75 | 80 | | 104 | |
| Large coffees | 300 | 2 | 600 | 2 | | 2 | |
| Energy drinks | 75 | 2 | 150 | 4 | | 5 | |
| Textbooks | 8 | 90 | 720 | 110 | | 120 | |
**2017 Summary:**
- **Total cost:** \$1,575
- **Price index:** 100 (Base year)
**Tasks:**
- Perform calculations for 2018 and 2019, completing the cost and index for these years.
**Between Year Comparisons:**
- **2017 to 2018 Increase:**
- Calculate the percentage increase in CSPI.
- **2018 to 2019 Increase:**
- Calculate the percentage increase in CSPI.
**Analysis Questions:**
Given potential reasons for changes in the CSPI, identify which could cause overestimation of inflation:
1. Professors requiring purchase of 10 notebooks regardless of price.
2. Shifts in consumption due to changing prices of coffee and energy drinks.
3. Availability of a new personal transporter.
4. Improved textbook quality with additional online
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