Suppose that the market basket for the university student price index (USPI) consists of 5 textbooks and 100 gallons of gasoline. In 2010, the base year for this index, textbooks cost $50 each and gas cost $1 per gallon. In 2011, textbooks cost $80 each and gasoline cost $3 per gallon. The USPI for 2011 is:

$200

Explanation:

The computation of USPI is shown below:-

Goods       2010      Quantity   2011 price  2010 basket    2011 basket

                 Price                                              price               price

Textbook       $50       5             $80              $250             $400

Gasoline         $1          100         $3                 $100              $300

Total                                                                  $350              $700

So Price index for 2011 = (2011 basket price ÷ 2010 basket price) × 100

= $700 ÷ $350 × 100

= $200

c

explanation:

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