We read your photo as:

Calculate the RPI and the required income adjustment given the basket of goods and their prices for two years.

Economics

ScanSolve AI Answer

Answers

2 parts
a

109.30\textbf{109.30}

b

930.23\textbf{930.23}

Step-by-step solution

5 steps

let's calculate the Retail Price Index (RPI) and the necessary income adjustment.

Part a· 3 steps

What is the numerical value of the RPI?

  1. Calculate the total weighted price for Year 1.

    We multiply the weight of each good by its price in Year 1 and sum them up.

    Total Weighted Price (Year 1)=(5×100)+(2×200)+(1×50)+(2×600)\text{Total Weighted Price (Year 1)} = (5 \times 100) + (2 \times 200) + (1 \times 50) + (2 \times 600) =500+400+50+1200= 500 + 400 + 50 + 1200 =2150= 2150
  2. Calculate the total weighted price for Year 2.

    We multiply the weight of each good by its price in Year 2 and sum them up.

    Total Weighted Price (Year 2)=(5×150)+(2×250)+(1×100)+(2×500)\text{Total Weighted Price (Year 2)} = (5 \times 150) + (2 \times 250) + (1 \times 100) + (2 \times 500) =750+500+100+1000= 750 + 500 + 100 + 1000 =2350= 2350
  3. Calculate the RPI.

    The formula for the RPI is:

    RPI=Total Weighted Price (Year 2)Total Weighted Price (Year 1)×100\text{RPI} = \frac{\text{Total Weighted Price (Year 2)}}{\text{Total Weighted Price (Year 1)}} \times 100 RPI=23502150×100\text{RPI} = \frac{2350}{2150} \times 100 RPI≈1.093023×100\text{RPI} \approx 1.093023 \times 100 RPI≈109.30\text{RPI} \approx \boxed{\textbf{109.30}}

Part b

930.23\textbf{930.23}

If a person earns 10,000 per week in year one, by how much should his income increase so as to maintain the same living standard?

  1. Calculate the percentage increase in prices (inflation rate).

    The percentage increase in prices is the RPI minus 100.

    Inflation Rate=RPI−100\text{Inflation Rate} = \text{RPI} - 100 Inflation Rate=109.30−100=9.30%\text{Inflation Rate} = 109.30 - 100 = 9.30\%
  2. Calculate the required income increase.

    To maintain the same living standard, the person's income must increase by the same percentage as the inflation rate.

    Required Income Increase=Original Income×Inflation Rate100\text{Required Income Increase} = \text{Original Income} \times \frac{\text{Inflation Rate}}{100} Required Income Increase=10,000×9.3023100\text{Required Income Increase} = 10,000 \times \frac{9.3023}{100} Required Income Increase≈10,000×0.093023\text{Required Income Increase} \approx 10,000 \times 0.093023 Required Income Increase≈930.23\text{Required Income Increase} \approx \boxed{\textbf{930.23}}
Was this helpful?

Try one yourself

A new problem that tests the same skill.

Still stuck on this one?

Ask a follow-up, and the answer starts from this question.

Got a different question?Ask your own question