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Formula for a Price Index
A price index, with the Consumer Price Index (CPI) being a prominent example, measures the relative change in the price of a basket of goods. It is calculated by dividing the basket's price in the current year by its price in a base year, then multiplying by 100. This standardizes the measure by setting the base year index value to 100, providing a clear point of reference for comparison.
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Introduction to Macroeconomics Course
Ch.4 Inflation and unemployment - The Economy 2.0 Macroeconomics @ CORE Econ
The Economy 2.0 Macroeconomics @ CORE Econ
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Formula for a Price Index
Suppose the total cost of a fixed basket of consumer goods and services was $200 in the base year and $250 in the current year. Using this information, what is the value of the price index for the current year?
Analyzing Annual Price Changes
Calculating CPI from Basket Data
A country's economic analysts determine that the total cost of a representative basket of consumer goods was $500 in the designated base year. In the following year, the total cost for the exact same basket of goods fell to $450. Based on this data, the price index for the following year would be greater than 100.
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Formula for the Inflation Rate from a Price Index
GDP Deflator
An economy's fixed consumer basket consists of 10 books and 20 coffees. In the base year, the price of a book was $10 and the price of a coffee was $5. In the current year, the price of a book is $12 and the price of a coffee is $6. Using the base year as the reference, what is the value of the price index in the current year?
Interpreting a Price Index
If the total cost of a fixed basket of goods has increased by exactly 25% since the designated base year, the price index for the current year will be 125.
Calculating Basket Cost from a Price Index
An economy tracks the price of a fixed basket of goods, which consists of 5 pizzas and 10 sodas. The prices for these goods over three years are shown in the table below.
Year Price of a Pizza Price of a Soda 2021 $10.00 $2.00 2022 $12.00 $2.50 2023 $15.00 $3.00 By selecting 2022 as the base year, what is the calculated price index for the year 2023, rounded to one decimal place?
Analyzing a Price Index Calculation Method
A country's price index for the current year is calculated to be 95, using the previous year as the base period. Which of the following statements accurately describes the relationship between the cost of the fixed basket of goods in the two years?
Analyzing an Incorrect Price Index Calculation
An economy's fixed basket of goods consists of 20 apples and 10 bananas. The table below shows the price of these goods over three years. Using Year 1 as the base year, match each year to its correct price index.
Year Price of an Apple Price of a Banana Year 1 $1.00 $2.00 Year 2 $1.20 $2.50 Year 3 $1.50 $2.00 An economy's fixed basket of goods consists of 5 pizzas and 10 sodas. In the base year, the price of a pizza was $10 and the price of a soda was $2. In the current year, the price of a soda has risen to $2.80, and the overall price index is calculated to be 140. Based on this information, what must be the price of a pizza in the current year? (Enter a numerical value only, without the dollar sign)