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Chapter 7: Q.19 (page 163)

Consider Table 7-1. Suppose that the 2019 price of corn was to rise to 8.50\( per bushel but that the price of a digital device was to fall to 300\). The quantities of the two commodities remain the same, however. How would these changes affect the value of the 2019 price index?

Short Answer

Expert verified

The value of2019price index is111.54

Step by step solution

01

introduction

The calculation of the cost of the market basket. The table is as follows,

02

explanation

Calculation of price index of 2019,

cost of the market basket in 2019=$1450

cost of the market basket in the base year2009=$1300

⇒costofmarketbasketin2019costofmarketbasketinbaseyear2009×100=14501300×100=111.54

Hence the price index is111.54

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