6. Calculating inflation using a simple price index Consider an imaginary price index, the Undergraduate Price Index (UPI), created to represent the annual purchases made by a typical undergradute. The following table contains information on the market basket for the UPI and the price of each good in 2020, 2021 , and 2022. The cost of each good in the basket as well as the basket’s total cost are given for 2020. Perform these same calculations for 2021 and 2022, and enter the results in the following table.
Quantity in Basket
2020
2021
2022
Item
Price (Dollars)
Cost (Dollars)
Price (Dollars)
Cost (Dollars)
Price (Dollars)
Cost (Dollars)
Streaming services
1
64
64
104
□
134
Iced coffees
150
2
300
2
□
2
Textbooks
10
80
800
85
□
105
Notebooks
8
2
16
2
4
□
Energy drinks
40
3
120
4
□
5
□
Total cost
1,300
□
□
Price index
100
Suppose this price index uses 2020 as the base year. In the last row of the table, calculate and enter the value of the UPI for the remaining years. Between 2020 and 2021, the UPI increased by . Between 2021 and 2022, the UPI increased by
Which of the following, if true, would illustrate why price indexes such as the UPI might overstate inflation in the cost of going to college? Check all that apply.
The quality of content provided by streaming services improved dramatically from 2020 to 2022.
Many companies invested heavily in the actors cast for their original series, but this quality change is hard to measure.
A natural dietary supplement is developed that is clinically proven to safely boost memory.
As the price of textbooks increased, more and more students turned to the used-book market or chose not to buy textbooks at all, instead using the copies on reserve in the library.
Professors required each student to buy 10 textbooks, regardless of the price.
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