Question

In: Economics

Calculate a price index for 2018, 2019, and 2020 using the following information about prices. Let...

Calculate a price index for 2018, 2019, and 2020 using the following information about prices. Let the market basket consist of the price of one pizza pie, two sodas, and four caffe lattes. Let the year 2018 be the base year (with an index value of 100). See the instruction video, "inflation.ppsm".

Year

Price of a pizza

Price of a Soda

Price of a Caffe Latte

2018

2019

2020

$6.00

$6.50

$7.0

$0.50

$0.55

$0.65

$1.50

$2.20

$2.60

A. Calculate the price index for each year. To compute the price index for each year, you must first compute cost of market basket for each year (Show mathematical steps in detail to receive full credits).

B. How much inflation occurred between 2018 and 2019? Between 2018 and 2020? In other words, what is the change in the price index between 2018 vs 2019 and 2018 vs 2020?

1. Show mathematical steps in detail

2. interpret what the computed numbers (inflation rate) indicate in detail

Expert Solution

Rahul Sunny answered 2 years ago

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