Concept explainers
Many factors influence the retail price of gasoline. The following table shows the average retail price for a gallon of regular grade gasoline for each year from 2011 through 2014 (U.S. Energy Information Administration website, April 2015).
Year | Average Price ($) |
2011 | 3.521 |
2012 | 3.618 |
2013 | 3.505 |
2014 | 3.358 |
- a. Use 2011 as the base year and develop a price index for the retail price of a gallon of regular grade gasoline over this four-year period.
- b. Use 2012 as the base year and develop a price index for the retail price of a gallon of regular grade gasoline over this four-year period.
a.
Find the price index for the retail price of a gallon of regular grade gasoline over this four-year period by using 2011 as the base year.
Answer to Problem 17E
The price indexes for the retail price of a gallon of regular grade gasoline over this four-year period by using 2011 as the base year are,
Year | Average Price ($) | |
2011 | 3.521 | 100 |
2012 | 3.618 | 102.8 |
2013 | 3.505 | 99.5 |
2014 | 3.358 | 95.4 |
Explanation of Solution
Calculation:
The data shows the average retail price for a gallon of regular grade gasoline for each year from 2011 to 2014.
The price indexes for the retail price of a gallon of regular grade gasoline over this four-year period by using 2011 as the base year are obtained below:
Year | Average Price ($) | |
2011 | 3.521 | |
2012 | 3.618 | |
2013 | 3.505 | |
2014 | 3.358 |
b.
Find the price index for the retail price of a gallon of regular grade gasoline over this four-year period by using 2012 as the base year.
Answer to Problem 17E
The price indexes for the retail price of a gallon of regular grade gasoline over this four-year period by using 2012 as the base year are,
Year | Average Price ($) | |
2011 | 3.521 | 97.3 |
2012 | 3.618 | 100 |
2013 | 3.505 | 96.9 |
2014 | 3.358 | 92.8 |
Explanation of Solution
Calculation:
The price indexes for the retail price of a gallon of regular grade gasoline over this four-year period by using 2012 as the base year are obtained below:
Year | Average Price ($) | |
2011 | 3.521 | |
2012 | 3.618 | |
2013 | 3.505 | |
2014 | 3.358 |
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