Assuming that 2001 is the base year, calculate the price index for 2002.
In 2002, the price index is
.
(Round your answer to two decimal places.)
Market Basket Quantity:
wheat=30lbs, 2001 price=$3.00, 2002 price=$3.60
pears=30lbs, 2001 price=$3.50, 2002 price=$3.75
To calculate the price index for 2002 using 2001 as the base year, we follow these steps:
1. Calculate the total cost of the market basket in 2001:
30 lbs of wheat x $3.00 per lb + 30 lbs of pears x $3.50 per lb = $90 + $105 = $195
2. Calculate the total cost of the same market basket in 2002:
30 lbs of wheat x $3.60 per lb + 30 lbs of pears x $3.75 per lb = $108 + $112.50 = $220.50
3. Divide the 2002 total cost by the 2001 total cost and multiply by 100 to get the price index:
($220.50 / $195) x 100 = 112.31
Therefore, the price index for 2002 using 2001 as the base year is 112.31.
The inflation rate between 2001 and 2002 is enter your response here
%.
(Round your answer to two decimal places.)
To calculate the inflation rate between 2001 and 2002 using the price index we calculated earlier:
1. Subtract the 2001 price index (which is always 100) from the 2002 price index:
112.31 - 100 = 12.31
2. Divide the result by the 2001 price index and multiply by 100 to get the inflation rate:
(12.31 / 100) x 100 = 12.31%
Therefore, the inflation rate between 2001 and 2002 using 2001 as the base year is 12.31%.
To calculate the price index for 2002, we need to use the formula:
Price index = (Total cost of market basket in the current year / Total cost of market basket in the base year) * 100
First, let's calculate the total cost of the market basket in both years.
2001:
Total cost = (Quantity of wheat in 2001 * 2001 price of wheat) + (Quantity of pears in 2001 * 2001 price of pears)
= (30 lbs * $3.00) + (30 lbs * $3.50)
= $90 + $105
= $195
2002:
Total cost = (Quantity of wheat in 2002 * 2002 price of wheat) + (Quantity of pears in 2002 * 2002 price of pears)
= (30 lbs * $3.60) + (30 lbs * $3.75)
= $108 + $112.50
= $220.50
Now, let's calculate the price index for 2002:
Price index = (Total cost of market basket in 2002 / Total cost of market basket in 2001) * 100
= ($220.50 / $195) * 100
= 1.13 * 100
= 113
Therefore, the price index for 2002 is 113.
To calculate the price index for 2002, we need to compare the prices of the market basket items in 2002 to their prices in the base year, which is 2001. Here's how to do it:
1. Calculate the expenditure in the base year (2001) and in the year of interest (2002) for each item by multiplying the quantity by the price:
- Wheat expenditure in 2001 = 30 lbs × $3.00/lb = $90.00
- Wheat expenditure in 2002 = 30 lbs × $3.60/lb = $108.00
- Pears expenditure in 2001 = 30 lbs × $3.50/lb = $105.00
- Pears expenditure in 2002 = 30 lbs × $3.75/lb = $112.50
2. Calculate the price index for each item by dividing the expenditure in the year of interest (2002) by the expenditure in the base year (2001) and multiplying it by 100:
- Price index for wheat = (Expenditure in 2002 / Expenditure in 2001) × 100 = ($108.00 / $90.00) × 100 = 120.00
- Price index for pears = (Expenditure in 2002 / Expenditure in 2001) × 100 = ($112.50 / $105.00) × 100 = 107.14
3. Finally, round the price index to two decimal places:
- Price index for wheat in 2002 = 120.00
- Price index for pears in 2002 = 107.14
Therefore, the price index for 2002 is 120.00 for wheat and 107.14 for pears.