Question

Income Yorktown Earns from Renting the Outdoor Arena at Lakeside Park, With Changes in CPI Year Rental Fee CPI

2015 Rental Fee $14,400 CPI180.9

2016 Rental Fee $15,000 CPI 207.6

2017 Rental Fee$15,800 CPI212.9

2018 Rental Fee $16,800 CPI 220.7

2019 $17,020 232.5

3. Yorktown is considering ways to increase revenue. One option is to increase the rental rates on the outdoor arena located at Lakeside Park. From the table above, what is the increase in the rental fee for the period compared to the increase in the CPI?

Answer 1

The percentage increase in rental fee and CPI over the period is determined as below:

Percentage Increase in Rental Fee = (Rental Fee in 2019 - Rental Fee in 2015)/Rental Fee in 2015*100 = (17,020 - 14,400)/14,400*100 = 18.19%

Percentage Increase in CPI = (CPI in 2019 - CPI in 2015)/CPI in 2015 = (232.5 - 180.9)/180.9*100 = 28.52%

Based on the above calculations, it can be concluded that the CPI has increased more as compared to the increase in rental fee over the period 2015 to 2019. In other words, the increase in rental fee is less than the increase in overall prices of goods and services (as indicated by increase in CPI) over the relevant period.