math question

Question

Suppose a group of consumers spends 30 percent of its disposable income on food, 20 percent on clothing, and 50 percent on rent. If over the course of a year the price of food rose 10 percent, the price of clothing dropped 5 percent, and rent rose 15 percent, what was the average price increase experienced by these consumers? Calculate to one decimal place.

Answer 1

Hi Glen

 

Apply the percent change to each part of the disposable income based on its percent of the total.

 

Then add these parts together

 

food: (.30)·1.10 = .33

 

clothing: (.20)·(.95) = .19    Use .95 because that equals 1-.05

 

rent: (.50)·(1.15) = .575

 

.33 + .19 + .575 = 1.095

 

Average price increase is 9.5%