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Attempts Keep the Highest no score out of $3/3$

$5.$ Calculating inflation using a simple price index

Consider a fictional price index, the University Student Price Index $($USPI$),$ based on a typical university student$$s annual purchases. Suppose the following table shows information on the market basket for the USPI and the prices of each of the goods in $2020,2021,$ and $2022.$

The cost of each item in the basket and the total cost of the basket are shown for $2020.$

Perform these same calculations for $2021$ and $2022,$ and enter the results in the following table.

Quantity in Basket

$2020$

$2021$

$2022$

Price

Cost

Price

Cost

Price

Cost

$($Dollars$)$

$($Dollars$)$

$($Dollars$)$

$($Dollars$)$

$($Dollars$)$

$($Dollars$)$

Notebooks $103303$

$4$

Calculators $1757580$

$104$

Large coffees $30026002$

$2$

Energy drinks $7521504$

$5$

Textbooks $890720110$

$120$

Total cost $1,575$

Price index $100$

Suppose the base year for this price index is $2020.$

In the last row of the table, calculate and enter the value of the USPI for the remaining years.

Between $2020$ and $2021,$ the USPI increased by

$\%$

$.$ Between $2021$ and $2022,$ the USPI increased by

$\%$

$.$

Which of the following, if true, would illustrate why price indexes such as the USPI might overstate or exaggerate inflation in the cost of going to university? Check all that apply.

A new type of personal transporter, which made it easier to get around places like university campuses, became available for purchase.

The quality of textbooks increased dramatically from $2020$ to $2022,$ with textbook companies bundling new online study aids with their books.

A large percentage of students now buy their textbooks online, while the USPI uses data from university bookstores that increase the prices of textbooks by a larger percentage per year than online retailers.

As the price of energy drinks increased relative to the price of coffee between $2020$ and $2022,$ students decreased their consumption of energy drinks and increased their consumption of coffee.

Professors required each student to buy eight textbooks, regardless of the price.

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