Question

In 1983, a microwave oven cost $78. 75. Today, a microwave oven costs $92. 66. If the CPI is 177, what is the relation of the actual price of a microwave oven to the expected price, to the nearest cent? a. The actual price is $46. 73 lower than the expected price. B. The actual price is $5. 59 lower than the expected price. C. The actual price is $13. 91 higher than the expected price. D. The actual price is $71. 35 higher than the expected price.

Answer 1

The actual price is $46.73 lower than the expected price.

What is the Formula for Consumer Price Index?

$CPI_t=\frac{C_t}{C_0} * 100$

CPI=consumer price index in the current period

Ct= expected cost in current period

C₀ =cost in the base period

It is given that

Price in base period ie 1983 C₀= $78.75

The actual cost of the microwave oven = $92.66

Consumer Price Index= 177

So, expected price of microwave oven in the current period

Ct= CPIt * C₀ /100 = 177*78.75/100 = $139.39

Difference between the actual price and expected price = 139.39-92.66=$46.73

Therefore, The actual price is $46.73 lower than the expected price.

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