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Inflation and Money - End of Chapter Problem Suppose the typical college student spends money primarily on the products in the accompanying table, Product Soda Pizzas Chicken Wings Room and Board Textbooks Quantity 2019 Price 2020 Price 365 $2.25 $2.30 200 $10.00 $11.00 165 $7.00 $7.50 $10,000 $10,800 4 $150 $165 Round your answers to two decimal places. 1 a. What is the cost of the basket in 2019? Cost in 2019: $ b. What is the cost of the basket in 2020? Cost in 2020: $ c. What is the inflation rate for a college student between 2019 and 2020? Inflation rate: d. Has the cost of living for college students risen or fallen? The cost of living has

Respuesta :

Based on the given information: a. The cost of basket in 2019 is $14,576.25. b. The cost of basket in 2020 is $15,737. c. The inflation rate is 7.96%. d. The cost of living for college students has risen.

A market basket is a selection of goods and services that are steadily purchased and sold throughout an economic system. The cost of basket of goods and services is determined by multiplying the quantity of each item times its price.

a. Cost of basket in 2019 = 365*2.25 + 200*10 + 165*7 + 1*10,000 + 4*150 = $14,576.25

b. Cost of basket in 2020 = 365*2.30 + 200*11 + 165*7.5 + 1*10,800 + 4*165 = $15,737.

c.  The Consumer Price Index (CPI) estimates the overall change in consumer prices based on a representative basket of goods and services over time. The consumer price index is determined by dividing the cost of the market basket in year t by the cost of the same market basket in the base year. CPI is the most well-known indicator of inflation.

CPI = 15737/14576.15 *100 = 107.96%

Hence inflation can be calculated between 2019 and 2020 is: 107.96 – 100 = 7.96%

d. Due to the inflation that occurred from 2019 to 2020 the living cost for students has increased.

Learn more about Market basket:

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