Consider an imaginary price index, the Undergraduate Price Index (UPI), created to represent the annual purchases made by a typical undergradute. The following table contains information on the market basket for the UPI and the price of each good in 2020, 2021, and 2022. The cost of each good in the basket as well as the basket’s total cost are given for 2020. Perform these same calculations for 2021 and 2022, and enter the results in the following table. Quantity in Basket 2020 2021 2022 Price Cost Price Cost Price Cost (Dollars) (Dollars) (Dollars) (Dollars) (Dollars) (Dollars) Streaming services 1 64 64 104 134 Iced coffees 150 2 300 2 2 Textbooks 10 80 800 85 105 Notebooks 8 2 16 2 4 Energy drinks 40 3 120 4 5 Total cost 1,300 Price index 100 Suppose this price index uses 2020 as the base year. In the last row of the table, calculate and enter the value of the UPI for the remaining years. Between 2020 and 2021, the UPI increased by . Between 2021 and 2022, the UPI increased by . Which of the following, if true, would illustrate why price indexes such as the UPI might overstate inflation in the cost of going to college? Check all that apply. Professors required each student to buy 10 textbooks, regardless of the price. Energy drinks became increasingly popular on college campuses between 2020 and 2022 due to significant improvements in flavor, but this quality change is hard to measure. As the price of premium streaming services rose, fewer students decided to buy them, opting instead to borrow log-in information from friends and relatives. A new, cheaper internet option rolled out services nationwide.

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 an imaginary price index, the Undergraduate Price Index (UPI), created to represent the annual purchases made by a typical undergradute. The following table contains information on the market basket for the UPI and the price of each good in 2020, 2021, and 2022.

The cost of each good in the basket as well as the basket’s total cost are given for 2020.

Perform these same calculations for 2021 and 2022, and enter the results in the following table.

	Quantity in Basket	2020	2021	2022
Price	Cost	Price	Cost	Price	Cost
(Dollars)	(Dollars)	(Dollars)	(Dollars)	(Dollars)	(Dollars)
Streaming services	1	64	64	104		134
Iced coffees	150	2	300	2		2
Textbooks	10	80	800	85		105
Notebooks	8	2	16	2		4
Energy drinks	40	3	120	4		5
Total cost			1,300
Price index			100

Suppose this price index uses 2020 as the base year.

In the last row of the table, calculate and enter the value of the UPI for the remaining years.

Between 2020 and 2021, the UPI increased by

. Between 2021 and 2022, the UPI increased by

Which of the following, if true, would illustrate why price indexes such as the UPI might overstate inflation in the cost of going to college? Check all that apply.

Professors required each student to buy 10 textbooks, regardless of the price.

Energy drinks became increasingly popular on college campuses between 2020 and 2022 due to significant improvements in flavor, but this quality change is hard to measure.

As the price of premium streaming services rose, fewer students decided to buy them, opting instead to borrow log-in information from friends and relatives.

A new, cheaper internet option rolled out services nationwide.

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