Question

Suppose that in​ 2017, a typical U.S. student attending a​ state-supported college bought 10 textbooks at a price of ​$110 per book and enrolled in 30 credit hours of coursework at a price of ​$350 per credit hour. In​ 2018, the typical student continued to purchase 10 textbooks and enroll in 30 credit​ hours, but the price of a textbook rose to ​$120 per​ book, and the tuition price increased to ​$390 per credit hour. The base year for computing a​ "student price​ index" using this information is 2017.
Required:
What is the value of the student price index in 2017? In 2018? Show your work.

Answer 1

Answer:

• 2017 Price Index is 100
• 2018 Price Index is 111

Explanation:

The Price Index for any given Base year is always 100. 2017 is staed to be the base year so it's price index is 100.

2018

The Student Price Index can be calculated using the formula;

SPI = $\frac{cost of basket of goods in the year of interest}{Cost of the basket of goods in the base year} * 100$

= $\frac{(10 * 120) + (30* 390)}{(10 * 110) + (30 * 350)}$ * 100

= $\frac{12,900}{11,600} * 100$

= 111.21

= 111