(a) Compute the equivalent annual inflation rate, based on the Consumer Price Index, for the period from 1990 to 2010. (b) Using the equivalent annual inflation rate computed in part (a), estimate the consumer price index for 2020. Answer: a). 2.59%, b) 281.6

Price Change with Indexes 495 TABLE 14-2 CPI Index values and Yearly Percentage increases, 1973-2010 Year CPI Value CPI Increase Year CPI Value 973 CPI Increase 6.2% 1974 1992 49.3 140.3 11.0 1975 1993 53.8 144.5 9.1 3.0 1976 1994 56.9 148.2 5.8 2.6 1977 1995 60.6 152.4 2.8 6.5 1996 1978 65.2 156.9 2.9 7.6 1997 1979 160.5 72.6 2.3 11.3 1998 1980 163.0 82.4 1.6 13.5 1999 1981 166.6 90.9 2.2 10.3 2000 1982 172.2 96.5 3.4 6.2 2001 1983 99.6 2.8 3.2 2002 179.9 1984 103.9 1.6 4.3 2003 184.0 1985 2.3 107.6 3.6 2004 188.9 1986 2.7 109.6 1.9 2005 195.3 3.4 1987 113.6 3.6 2006 201.6 3.2 1988 118.3 4.1 2007 207.3 2.8 1989 124.0 4.8 2008 215.3 3.8 1990 130.7 5.4 2009 214.5 0.4 1991 136.2 4.2 2010 218.1 1.6 2011 224.9 3.2 2012 229.6 2.1 Reference base: 1982-1984 100 historic price for a single year, or we can calculate an average inflation rate or aver age rate of price increase as measured by the index over a time period extending several How to Use Price Indexes in Engineering Economic Analysis One may question the usefulness of historical data (as provided by price indexes) when engineering economic analysis deals with economic effects projected to occur in the future However, historical index data are often better predictors of future prices than official