Question

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

Answer 1

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.

Answer 2

The inflation rate between 2001 and 2002 is enter your response here
​%.
​(Round your answer to two decimal​ places.)

Answer 3

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%.