Question

Suppose that the market basket for the university student price index (USPI) consists of 5 textbooks and 100 gallons of gasoline. In 2010, the base year for this index, textbooks cost $50 each and gas cost $1 per gallon. In 2011, textbooks cost $80 each and gasoline cost $3 per gallon. The USPI for 2011 is:

Answer 1

$200

Step-by-step explanation:

The computation of USPI is shown below:-

Goods 2010 Quantity 2011 price 2010 basket 2011 basket

Price price price

Textbook $50 5 $80 $250 $400

Gasoline $1 100 $3 $100 $300

Total $350 $700

So Price index for 2011 = (2011 basket price ÷ 2010 basket price) × 100

= $700 ÷ $350 × 100

= $200