Question

In 1983, a cast-iron pan cost $28.35. Today, a cast-iron pan costs $52.95. If the CPI is 166, what is the percent relation of the actual price of a cast-iron pan to the expected price?
a.
The actual price is 11.1% lower than the expected price.
b.
The actual price is 20.8% lower than the expected price.
c.
The actual price is 31.5% higher than the expected price.
d.
The actual price is 12.5% higher than the expected price.

Answer 1

Use the CPI to scale the 1983 price: expected price = 28.35 × (166/100) = 28.35 × 1.66 = $47.06 (approx).
Actual price 52.95 is 52.95 − 47.06 = 5.89 higher, which is 5.89 / 47.06 ≈ 0.125 ≈ 12.5% higher.

Answer: d.