Now you see what the BLS economist do, except with a more complex basket of goods. Now try to construct an index and determine the inflation rate on your own. The table shows the prices of fruit purchased by the typical college student from 2001 to 2004. What is the amount spent each year on the “basket” of fruit with the quantities shown in column 2? (5 points) Items Qty. 2001 2002 2003 2004 Price Amount Spent Price Amount Spent Price Amount Spent Price Amount Spent Apples 10 $0.50 $0.75 $0.85 $0.88 Bananas 12 $0.20 $0.25 $0.25 $0.29 Grapes 2 $0.65 $0.70 $0.90 $0.95 Raspberries 1 $2.00 1.9 2.05 2.13 $2.13 Total Construct the price index for a “fruit basket” in each year using 2003 as the base year. (5 points) Compute the inflation rate for fruit prices from 2001 to 2004. (5 points) Identify and contrast the differences between the rise in prices due to inflation and the rise in prices in microeconomic markets. (5 points)

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Question

Now you see what the BLS economist do, except with a more complex basket of goods. Now try to construct an index and determine the inflation rate on your own.

The table shows the prices of fruit purchased by the typical college student from 2001 to 2004. What is the amount spent each year on the “basket” of fruit with the quantities shown in column 2? (5 points)

Items	Qty.	2001	2002	2003	2004
		Price	Amount Spent	Price	Amount Spent	Price	Amount Spent	Price	Amount Spent
Apples	10	$0.50		$0.75		$0.85		$0.88
Bananas	12	$0.20		$0.25		$0.25		$0.29
Grapes	2	$0.65		$0.70		$0.90		$0.95
Raspberries	1	$2.00		1.9		2.05		2.13	$2.13
Total