Question

Kiara Reyes

Question 12 of 13
The Consumer Price Index (CPI) is used to measure prices relative to some base price.
The Bureau of Labor Statistics maintains the index which measures prices relative to
the years 1982 to 1984.
The base CPI is 100 and corresponds to average prices in 1982 to 1984. Suppose the
CPI for new
vehicles in November 2018 was 145.055. This means that prices for new vehicles in
November 2018 were 145.055% of what they were in 1982 to 1984.
a) Suppose in 1984, the list price of a new Toyota Corolla was $9,830.00. Using the
CPI, what would be the price of a new Toyota Corolla in November 2018? Round to the
nearest cent.

Answer 1

To calculate the price of a new Toyota Corolla in November 2018, given the original price in 1984 and the CPI for new vehicles, adjust the original price by the increase in CPI over the years. The price would be $14,257.90 after adjusting for inflation.

Step-by-step explanation:

The Consumer Price Index (CPI) is a measure used to calculate the price change of a fixed basket of goods and services over time, and it is often used to assess inflation.

When the CPI for new vehicles in November 2018 is given as 145.055, this indicates that prices have increased to 145.055% of the average prices between 1982 to 1984 (the base years, where CPI is set at 100).

To calculate the price of a new Toyota Corolla in November 2018 if it was $9,830.00 in 1984, we use the following formula:

Adjusted Price = Original Price × (CPI in 2018 / CPI in Base Period)

In this case:

Adjusted Price = $9,830.00 × (145.055 / 100)

Adjusted Price = $9,830.00 × 1.45055

Adjusted Price = $14,257.90 (rounded to the nearest cent)

Therefore, the price of a new Toyota Corolla in November 2018, adjusted for inflation using the CPI, would be approximately $14,257.90.