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. Quantity in Basket201720182019PriceCostPriceCostPriceCost(Dollars)(Dollars)(Dollars)(Dollars)(Dollars)(Dollars)Notebooks82162 4 Calculators16464104 134 Large coffees15023002 2 Energy drinks4031204 5 Textbooks108080085 105 Total cost 1,300 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 .

Answered: In the last row of the table, calculate…

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.

	Quantity in Basket	2017	2018	2019
Price	Cost	Price	Cost	Price	Cost
(Dollars)	(Dollars)	(Dollars)	(Dollars)	(Dollars)	(Dollars)
Notebooks	8	2	16	2		4
Calculators	1	64	64	104		134
Large coffees	150	2	300	2		2
Energy drinks	40	3	120	4		5
Textbooks	10	80	800	85		105
Total cost			1,300
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

Expert Solution

Part 1.

(I) Year 2018:

Cost of notebooks = 8 x 2 = 16

Cost of calculator = 1 x 104 = 104

Cost of large coffee = 150 x 2 = 300

Cost of energy drinks = 40 x 4 = 160

Cost of textbooks = 10 x 85 = 850

Total cost = 16 + 104 + 300 + 160 + 850 = 1,430

(II) Year 2019:

Cost of notebooks = 8 x 4 = 32

Cost of calculator = 1 x 134 = 134

Cost of large coffee = 150 x 2 = 300

Cost of energy drinks = 40 x 5 = 200

Cost of textbooks = 10 x 105 = 1,050

Total cost = 32 + 134 + 300 + 200 + 1,050 = 1,716

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