Homework 72 MyEconLab Module Seven Homework score 0 of 4 pts

Homework: 7-2 MyEconLab Module Seven Homework score: 0 of 4 pts Text Problem 7-8 5 of 25 (6 complete) Suppose in 2014, the cost of a market basket of goods was $2,001. In 2016, the cost of the same market basket of goods was $2,106 Calculate the price index for 2016, using the price indx formula, assume 2014 is the base year(Enter your response as an index number rounded to one decimal place)

Solution

The base year is 2014.

Cost of the market basket of goods in 2014 = $2,001

Cost of the market basket of goods in 2016 = 2,106

Calculate the Price Index -

Price Index = [Cost of market basket of goods in 2016/Cost of market basket of goods in 2014] * 100

Price Index = [$2,106/$2,001] * 100 = 105.2

The Price Index in 2016 is 105.2