Question

In 2007, the first generation of the i-phone sold for $499. The average cost of an i-phone today is $999. At a press conference just outside a telephone museum in Cle Elum, WA, the CEO of Apple, Tim Cook, stated that the rise in cost is purely due to inflation. Use the Consumer Price Index to either verify or falsify Cooks’s statement. Is he wrong?

Answer 1

Answer: the statement made by Tim Cook is TRUE

Explanation:

Given that;

in 2007 cost of 1st gen iphone = $499 (base year price)

cost of iphone today = $999 (current year price)

Using the Consumer Price Index

the Consumer Price Index = (cost pf product in current years/cost of product base year) × 100

we substitute

CPI = (999/499) × 100

CPI = 200.2004

so the CPI is 100.2004% higher in the current year than in the base year

Checking the inflation rate

IR = (( CPI this year- CPI last year)/CPI last year) × 100

CPI last year (base year) = 100

CPI current year is = 100.2004

so

IR = (( 100.2004 - 100)/100) × 100

IR = 0.002004 × 100

IR = 0.2004%

THEREFORE the statement made by Tim Cook is TRUE