Question

The CPI in 1975 was 130. In 2001, the CPI was 530. If a prom dress cost $78 in 1975, what was the cost of the same dress in 2001?

Answer 1

To find the cost of a prom dress in 2001 based on its 1975 price using the Consumer Price Index (CPI), calculate the CPI ratio and multiply the 1975 price by this ratio. The CPI ratio is 530/130, which equals approximately 4.0769. Thus, the dress would cost about $318 in 2001.

Step-by-step explanation:

The question relates to calculating the cost of an item, specifically a prom dress, in one year based on its cost in a previous year using the Consumer Price Index (CPI). The CPI is a measure that examines the weighted average of prices of a basket of consumer goods and services, such as transportation, food, and medical care. To calculate the cost of the prom dress in 2001 using the given CPI values, we need to determine the ratio of the CPI in 2001 to the CPI in 1975 and then apply that ratio to the 1975 price of the dress.

To do this calculation:

1. First, find the CPI ratio: CPI in 2001 / CPI in 1975 = 530 / 130 = 4.0769.
2. Then, calculate the cost of the dress in 2001 by multiplying the 1975 cost by this ratio: $78 * 4.0769 = approximately $318.

Therefore, the cost of the same dress in 2001, adjusted for inflation measured by the CPI, would be about $318.