Assume a ten percent increase in the price of all goods in 1991;if the base year is 1990,then the price index in 1991 will be
A)90.
B)110.
C)200.
D)1100.

Question

Quizplus · Accepted Answer

A price index measures the average change in prices over time for a set of goods and services. In this case, since there was a 10% increase in the price of all goods in 1991 compared to 1990, the price index would be calculated by dividing the total cost of goods in 1991 by the total cost of goods in 1990, and then multiplying by 100 to express the result as a percentage. 
Price Index = (Total cost of goods in 1991 / Total cost of goods in 1990) x 100
Since all goods experienced a 10% increase in price, the total cost of goods in 1991 would be 110% of the total cost of goods in 1990. 
Price Index = (110%/100%) x 100 = 110 
Therefore, the price index in 1991 would be 110, which is answer choice B.

Assume a Ten Percent Increase in the Price of All