Suppose that the 2022 price of corn were to rise to ​$8.60

Question

per​ bushel, but that the price of a digital device were to fall to ​$275
.
The quantities of the two commodities remain the​ same, however. How would these changes affect the value of the 2022 price​ index?
Part 2
Holding the quantities of the two commodities the​ same, a rise in the 2022 price of corn to ​$8.60

and a fall in the price of a digital device to ​$275

would cause the value of the 2022 price index to

Answer 1

increase. This is because the price of corn has increased, indicating inflation, while the price of the digital device has decreased, indicating deflation. The price index takes into account the prices of a basket of goods and services, and a change in the prices of either commodity can have an impact on the overall index value. With the increase in corn prices and decrease in digital device prices, the price index would reflect an increase in the overall cost of living, as consumers would need to pay more for basic food items like corn, and less for electronics.

Answer 2

...
Question content area right
Part 1

Corn

Digital Devices

Totals
Market Basket Quantity

100 bushels

2

2012 Price per Unit: ​corn=$4, device=​$450
Cost of Market Basket in 2012: corn=​$400, device=$900= total=​$1,300
2022 Price per Unit: corn=​$8 device=$350

Cost of Market Basket in 2022:​ corn=$800, device=$700=total=$1,500
the value of the 2022 price index to rise to?
.

Answer 3

To calculate the value of the 2022 price index, we need to use the following formula:

2022 Price Index = (Cost of Market Basket in 2022 / Cost of Market Basket in 2012) x 100

Substituting the given values, we get:

2022 Price Index = ($1,500 / $1,300) x 100 = 115.38

Therefore, the value of the 2022 price index would rise to 115.38.