Table 24-1

The following table pertains to Cheeseland, an economy in which the typical consumer's basket consists of 15 bushels of apples and 8 bushels of almond .

Year

Price of Apples

(Dollars per bushel)

Price of Almond

(Dollars per bushel)

Year 1 12 6
Year 2 9 11

Refer to Table 24-1. If Year 1 is the base year, then the inflation rate in Year 2 was

Question

Table 24-1

The following table pertains to Cheeseland, an economy in which the typical consumer's basket consists of 15 bushels of apples and 8 bushels of almond .

​

Year

Price of Apples

(Dollars per bushel)

Price of Almond

(Dollars per bushel)

Year 1	12	6
Year 2	9	11

​

Refer to Table 24-1. If Year 1 is the base year, then the inflation rate in Year 2 was

BlackTom AI · Accepted Answer

First, I’ll restate the key data to ensure we’re using the same numbers. The base-year basket has 15 bushels of apples and 8 bushels of almonds. Year 1 prices are: apples $12, almonds $6. Year 2 prices are: apples $9, almonds $11. The inflation rate is measured as the change in the cost of the base-year basket from Year 1 to Year 2, divided by the Year 1 cost.

Option 1: –2.19 percent. To check this, calculate the Year 1 cost of the basket: 15×12 + 8×6 = 180 + 48 = 228 dollars. Then compute Year 2 cost using Year 2 prices but the same base-year quantities: 15×9 + 8×11 = 135 + 88 = 223 dollars. The inflation rate is (Year2 cost − Year1 cost) / Year1 cost = (223 − 228) / 228 = −5/228 ≈ −0.0219, i.e., −2.19%. This matches the option.

Option 2: 2.19 percent. This would require a positive change, but the Year-2 basket cost (223) is less than the Year-1 cost (228) when using base-year quantities, so the rate is negative, not positive. The sign here is incorrect, reflecting a misunderstanding of the direction of price changes with the base-year basket.

Option 3: –4.69 percent. A negative 4.69% would imply a larger drop in the basket’s cost relative to Year 1, specifically a drop of about 4.69% (roughly 10.7 dollars). Since the actual drop is 5 dollars on a 228-dollar base, the correct drop is about 2.19%, not 4.69%. This option miscalculates both the magnitude and the cause of the change.

Option 4: 1.31 percent. A 1.31% increase would require Year2 cost to be about 231 dollars (1.31% of 228 is about 2.99, leading to 228+2.99 ≈ 231). But Year2 cost is 223, which is lower than 228, so this option gives an incorrect sign and an incorrect magnitude.

In summary, evaluating the base-year cost and the Year-2 cost with base-year quantities shows a decrease from 228 to 223 dollars, yielding a −2.19% inflation rate. The remaining options either reverse the sign, overstate the magnitude, or assume an increase where there is a decrease.

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