Question

Market Basket	2016		2017
Product	Quantity	Price	Price
Soda	365	$2.25	$2.30
Pizza	200	$10.00	$11.00
Chicken Wings	165	$7.00	$7.50
Room and Board	1	$10,000	$10,800
Textbooks	4	$150	$165

See table above. Suppose that the typical college student spend money primarily on food, room and board, and books. Assume the base year is 2016.

1. a) What is the cost of the basket in 2016?

2. b) What is the cost of the basket in 2017?

3. c) What is the inflation rate for a college student in 2017?

4. d) Does it costs a college student more or less to live in 2017 compared to 2016? EXPLAIN.

Answer 1

A. Cost of basket in 2016 =365*2.25+200*10+165*7+1*10000+4*150

= $ 14,576.25

B. Coat of basket 2017

= 365*2.3 + 200*11 + 165*7.5 + 1*10,800 + 4*165

= $ 15,737

C.

Inflation Rate =7.96%

D. Yes it costs more to the student in the year 2017 in compar8sion to 2016. In 2016it costed $ 14,576.25 but in 2017 same commodity basket costs him 7.96% more.

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