Question

-The table below details the individual Consumer Price Indices (CPI) for individual expenditure categories for 2016 and 2017:

CPI Category	2016	2017	Price Change
Gasoline	195.915	216.781
Apparel	122.637	120.614
College textbooks	346.15	342.34235

What was the price change between 2016 and 2017 in the gasoline expenditure category?

1. 216.781%

2. 110.65%

3. 10.65%

4. 195.915%

please explain me how to calculate and answers.

- Read the following excerpt from a U.S. Energy Information Administration Report that was published on January 9, 2018:

Crude Oil Prices. Brent crude oil averaged $54/barrel (b) in 2017, an increase of $10/b from 2016 levels. Prices increased fairly steadily through the second half of the year, with year-end prices higher than the annual average. Daily Brent spot prices ended 2017 near $67/b, which was the highest level since December 2014. The monthly average spot price of Brent crude oil increased by $2/b in December to $64/b, marking only the fourth time that monthly Brent crude oil prices averaged more than $60/b in the past 36 months

Most of the upward price movement in recent months reflects continuing draws in global oil inventory levels. EIA estimates that global petroleum and other liquid fuels inventories fell by an average of 0.4 million b/d in 2017, which was the first year of annual average draws since 2013. In addition, oil prices were supported by OPEC’s November 30, 2017, announcement to extend its crude oil supply reduction agreement through the end of 2018. Also, Brent prices increased in December because of a disruption to the North Sea’s Forties crude oil pipeline system early in the month. The Forties pipeline system is one of the primary distribution networks for Brent crude oil delivery in the North Sea, and its outage curtailed available supply in the near term. Trade press reports indicate the Forties pipeline system restarted operations in late December 2017.

Questions:

Based on the excerpt, was the increase in the gasoline expenditure category CPI due to a change in supply or demand in the market?

1. Demand, because there were several factors affecting the market that were caused by producers of crude oil. In particular, inventory levels increased, OPEC extended production increases, and there was a disruption in a major pipeline system.

2. Supply, because there were several factors affecting the market that were caused by producers of crude oil. In particular, inventory levels declined, OPEC extended production reductions, and there was a disruption in a major pipeline system.

3. Supply because price increases are generally due to production decisions. In addition, supply creates its own demand, thus the supply side of the market will determine equilibrium prices.

4. Demand because as prices rose we saw a reduction in the quantity demanded in the market. This led to the reduction in crude oil inventory levels and the production disruptions.

what is answer?

-Read the following excerpt from a Forbes article that was published on November 3, 2017:

Now department stores’ frantic plunge into the off-price sector is in danger of killing off the full-price apparel business for good, experts warn.

In addition to discounting merchandise in their full-line stores, marked-down goods are increasingly feeding the pipeline in department stores’ ever burgeoning off-price channel, from the already heavily promotional Macy’s expanding its BackstageLinks to an external site. spin-off concept to Nordstrom’s Rack format.“The off-price business is driving growth and getting bigger than the full-price channel,” said Susan LeeLinks to an external site., a partner with consultancy Simon-Kucher.

Today, Nordstrom operates 216 Nordstrom Rack off-price stores, nearly double the number of its 122 full-line stores, just as Saks Fifth Avenue’s 39-store full-line chain is a fraction of its 118-store Off 5th outlet fleet.

The Amazon Factor

Amazon isn’t doing the full-price apparel business any favors either. While fashion brands are by no means flocking to the site, still fearful of losing control of their brand image, the discount-aggressive e-tailer is gunning for apparel, and has scored some big symbolic wins, such as itspartnership with NikeLinks to an external site..

Lord & Taylor department stores, for one, recently started pricing matching AmazonLinks to an external site.. (Not to mention partnering with Wal-Mart in an online mall venture.)

Questions:

Based on the excerpt, was the decrease in the apparel expenditure category CPI due to a change in supply or demand in the market?

1. Supply. This is due to a reduction in overall competition in the low priced apparel market.

2. Supply. This is due to increased competition among suppliers in the apparel market, which reduced prices.

3. Demand because consumers tastes and preferences shifted to higher priced apparel items.

4. Demand. This is due to decreased competition among suppliers in the apparel market, which reduced prices.

Answer 1

% change in Price = (Price in 2017 - Price in 2016)/ Price in 2016 = (216.781 - 195.915)/195.915 = 20.866/ 195.915 = 0.1065 = 10.65%

Hence option 3 is correct

As the excerpt is talking about the Crude oil price changes which is a raw material for gasoline. Hence the price change in crude oil and brent will affect the Supply. Hence the price rise is due to supply.

Further excerpt is talking about factors which is leading to change in price i.e change in inventory level, OPEC extended production reductions and disruption in a major pipeline system.

Under this situation thee supplier will be willing to supply less at the same price and hence supply curve will shift inwards hence price will rise.

Hence option 2 is correct

In next question excerpt is talking about competition in the apparel market among the various types of players hence any price change will be due to supply.

Further, due to high discounts offered by e-tailers is pushing other suppliers also to reduce price. hence suppliers are willing to supply more at the given price thus supply curve will shift outwards. Hence prices fall

Hence option 2 is correct