Please help! We are going to create a college student price index or Coffee & Be
ID: 1186678 • Letter: P
Question
Please help!
We are going to create a college student price index or Coffee & Beer Pncc Index (CBPI) The market basket includes goods on which collcgc students spend their money: coffee, beer, tuition, apartment rent and computer software. Do your calculations in Excel and submit your spreadsheet. Part of this problem will be graded. The first job is to find the index values for these five goods. Go to the Bureau of Labor Statistics web page (www bK yov) to get the index value for cach of these goods for the last 5 years (2008-20I2). Next you can calculate the inflation rate for cach of the last 4 years (2009-2012). Next we need to find the quantities of these goods in order to construct the proper weights of cach good. Go to the Bureau of Economic Analysis (www.bea.gov) to get GDP figures for cach of these goods for 2010. (Hint: use NIPA table 1.5.5 and scarch for the following items: For Coffee assume 1% of all "food purchased for off premises use". For Beer assume 5% of "food service and accommodations"; For Rent use 75% of "housing services"; For Tuition use 10 % of "other services") Now we must recognize that the quantities from part (b) arc for the entire economy. But wc arc interested in quantities for just college students. So we need to adjust these quantities. Obviously, tuition is all paid by college students (or their parents). Assume that college students purchase half of all coffee, two thirds of all beer. 5% of all rent and 9% of software. Show the quantities consumed by college students for 2010. Calculate the weights of cach good. First add up all the expenses of college students -your amounts from part (c). Then to get the weight for tuition divide the tuition amount by the sum. Repeat this for cach of the other four goods. When you are finished your five weights should add up to one (1). Calculate the average inflation that a college student faced for 2009-2012. The inflation rate for tuition times its weight plus the inflation rate for coffee times its weight plus etc. Finally calculate the CBPI index from 2008 to 2012 with 2010 as the base year. So the index amount for 2010 is 100. for 2011 it is: 100 * (1+ pi 2011) = index 2011. Be sure to use inflation as a decimal here (inflation of 5% is 0.05). Working backwards to find index2009, we use the same formula: index2009 * (1+pi 2010) = index 2010 or index 2010=100(1+ pi 2009). If a college student had S400 in 2009. how much would he have to have in 2011 to have equal purchasing power?Explanation / Answer
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