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Price Index

1. The price of an item was $200 in 19X4 and $220 in 19X5. Calculate a simple price index for this item using 19X4 as the base year.

2. You are searching for a Government price index to use in estimating the price of an industrial chemical product. You have price data from 12 months ago. Would the Consumer Price Index (CPI) or a Producer Price Index (PPI) be the better choice for you to use? Why?

3. An item cost $250 each 8 months ago. The relevant index was 110.0 at that time. Today the index is 115.5. Estimate the item's price today.

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Solution Preview

1. The price increased from 200 to 220. This is a (220-200)/200 = 10% increase. Thus if we assume that the base index is 100. It will ...

Solution Summary

The solution goes into a great amount of detail regarding the question being asked. Step by step explanation is provided for each part of the question which makes it very easy to follow along for anyone with just a basic understanding of the concepts. Overall, an excellent response to the question being asked.