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 Quantity in Basket Price Cost Price Cost Price Cost (Dollars) (Dollars) (Dollars) (Dollars) (Dollars) (Dollars) Notebooks 15 2 30 8 Calculators 1 70 70 100 130 Large 250 500 2 2 coffees Energy drinks 50 2 100 Textbooks 10 120 1,200 150 180 Total cost 1,900 Price 100 index 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. As the price of textbooks increased, more and more students turned to the used-book market or chose not to buy textbooks at all, instead using the copies on reserve in the library. n A new, safe method of memory enhancement became available for purchase. n The quality and design of calculators improved dramatically from 2017 to 2019. For example, calculators made in 2019 accept memory cards, whereas those made in 2017 do not, but this quality change is hard to measure. Professors required each student to buy 10 textbooks, regardless of the price.

ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN:9780190931919
Author:NEWNAN
Publisher:NEWNAN
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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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**                     |
|---------------------|-------------------------------|------------------------------|------------------------------|
| **Quantity in Basket** | **Price (Dollars)** | **Cost (Dollars)** | **Price (Dollars)** | **Cost (Dollars)** | **Price (Dollars)** | **Cost (Dollars)** |
| Notebooks           | 15                          | 2             | 30        | 5                       |                      | 8                       |                      |
| Calculators         | 1                           | 70            | 70        | 100                     |                      | 130                     |                      |
| Large coffees       | 250                         | 2             | 500       | 2                       |                      | 2                       |                      |
| Energy drinks       | 50                          | 2             | 100       | 4                       |                      | 6                       |                      |
| Textbooks           | 10                          | 120           | 1,200     | 150                     |                      | 180                     |                      |
| **Total cost**      |                              | 1,900                                           |                           |                        |                           |                        |
| **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.**

- □ As the price of textbooks
Transcribed Image Text: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** | |---------------------|-------------------------------|------------------------------|------------------------------| | **Quantity in Basket** | **Price (Dollars)** | **Cost (Dollars)** | **Price (Dollars)** | **Cost (Dollars)** | **Price (Dollars)** | **Cost (Dollars)** | | Notebooks | 15 | 2 | 30 | 5 | | 8 | | | Calculators | 1 | 70 | 70 | 100 | | 130 | | | Large coffees | 250 | 2 | 500 | 2 | | 2 | | | Energy drinks | 50 | 2 | 100 | 4 | | 6 | | | Textbooks | 10 | 120 | 1,200 | 150 | | 180 | | | **Total cost** | | 1,900 | | | | | | **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.** - □ As the price of textbooks
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