Question
Consider an imaginary price index, the Undergraduate Price Index (UPI), created to represent the annual purchases made by a typical undergradute. The following table contains
Consider an imaginary price index, the Undergraduate Price Index (UPI), created to represent the annual purchases made by a typical undergradute. The following table contains information on the market basket for the UPI and the price of each good in 2020, 2021, and 2022.
The cost of each good in the basket as well as the basket's total cost are given for 2020.
Perform these same calculations for 2021 and 2022, and enter the results in the following table.
Quantity in Basket | 2020 | 2021 | 2022 | ||||
---|---|---|---|---|---|---|---|
Price | Cost | Price | Cost | Price | Cost | ||
(Dollars) | (Dollars) | (Dollars) | (Dollars) | (Dollars) | (Dollars) | ||
Streaming services | 1 | 64 | 64 | 104 | 134 | ||
Iced coffees | 150 | 2 | 300 | 2 | 2 | ||
Textbooks | 10 | 80 | 800 | 85 | 105 | ||
Notebooks | 8 | 2 | 16 | 2 | 4 | ||
Energy drinks | 40 | 3 | 120 | 4 | 5 | ||
Total cost | 1,300 | ||||||
Price index | 100 |
Suppose this price index uses 2020 as the base year.
In the last row of the table, calculate and enter the value of the UPI for the remaining years.
Between 2020 and 2021, the UPI increased by
. Between 2021 and 2022, the UPI increased by
.
Which of the following, if true, would illustrate why price indexes such as the UPI might overstateinflation in the cost of going to college?Check all that apply.
Professors required each student to buy eight notebooks, regardless of the price.
A new, cheaper internet option rolled out services nationwide.
As the price of premium streaming services rose, fewer students decided to buy them, opting instead to borrow log-in information from friends and relatives.
Energy drinks became increasingly popular on college campuses between 2020 and 2022 due to significant improvements in flavor, but this quality change is hard to measure.
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