Question

in 1980 when the consumer price index was 82.4, ivan purchased a house for 71,900 assuming that the prices of the houses increased at the same rate as the CPI from 1970 to 1980 approximately how much would the house have cost in 1970 when the CPI was 38.8?

Answer 1

x/71900
x = (71900)(38.8/82.4) =33855.8252427184466 =$33,900

Answer 2

cost of house in 1970= $33855.82

Explanation:

in this question we have given,

in 1980 consumer price index,
`I_(1)` = 82.4[/tex]

cost of house in 1980,
`=71,900 </p><p>CPI  in 1970,[tex]I_(2)`= 38.8

we have to determine cost of house in 1970,
`C_(2)`=?

Formula used

`(C_(2))/(C_(1)) =(I_(2))/(I_(1))` ............(1)

put values in equation (1)

`(C_(2))/(71900)  =(38.8)/(82.4) \\C_(2)=33855.82`