The table below lists the prices from last year and the base year for a college-related basket of goods. Assume that the typical
basket of goods for a college student consists of 200 gallons of gasoline, 60 pizzas, 45 6-packs of beer, and 3 textbooks. Basket of College-Related Goods Basket of Goods Price Base Year (dollars) Price Last Year (dollars) Gasoline (per gallon) $ 1.90 $ 2.50 Pizza (per pizza) 4.50 7.95 Beer (per 6-pack) 4.20 7.00 Textbook (per book) 100.00 233.00 Instructions: Round your answers to two decimal places. a. Using the values above, what is the rate of inflation between the base year and last year? % b. Assume that rather than buying textbooks for their courses last year, all students decided to buy online access cards at $100 per textbook. What is the rate of inflation between the base year and last year now? %
1 answer:
Answer:
a. Inflation rate is 75%
b, Inflation rate is 40%
Explanation:
Inflation rate = (the value expended on same quantity of goods last year minus the value expended on same quantity of goods in Base year) divided by the value expended on same quantity of goods in Base Year
The derivation of Inflation is shown in the attached document
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