Question

Suppose that the market basket for the university student price index (USPI) consists of 4 textbooks and 100 gallons of gasoline. In 2010, textbooks cost $50 each and gas costs $1 per gallon. In 2011, textbooks cost $50 each and gasoline costs $4 per gallon. The USPI for 2011 is:

a) 100
b) 200
c) 300
d) 400

Answer 1

The university student price index (USPI) for 2011 is calculated by comparing the cost of a fixed market basket to the base year (2010). Using the given prices, the USPI for 2011 is determined to be 200.

Step-by-step explanation:

The question concerns the calculation of the university student price index (USPI) for 2011 given a fixed market basket and comparing it to the base year of 2010. To find the USPI for 2011, we need to use the following formula:

USPI = (Cost of Market Basket in Current Year / Cost of Market Basket in Base Year) × 100

For the base year 2010, the cost is (4 textbooks × $50) + (100 gallons of gasoline × $1) = $200 + $100 = $300.

For 2011, the cost is (4 textbooks × $50) + (100 gallons of gasoline × $4) = $200 + $400 = $600.

Now, we calculate USPI for 2011 using these figures:

USPI = ($600 / $300) × 100 = 2 × 100 = 200

Therefore, the USPI for 2011 is option (b) 200.