Question

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

The value of$2019$price index is$111.54$

Step-by-step solution

introduction

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

explanation

Calculation of price index of $2019$,

cost of the market basket in $2019=\$1450$

cost of the market basket in the base year$2009=\$1300$

$$\begin{gathered} \Rightarrow \frac{\cos tofmarketbasketin2019}{\cos tofmarketbasketinbaseyear2009}\times 100 \\ =\frac{1450}{1300}\times 100=111.54 \end{gathered}$$

Hence the price index is$111.54$