A book cost $17 in 1987 (Annual Consumer Price index: 113.6). What was its price in 1994 dollars (Annual Consumer Price Index: 148.2)?

Question

We are working with consumer price index and there are answers on the page, I know the final answer is $22, but i do not know how to get there.

Answer 1

Alix,

 

In 1987 cost is $17 and CPI is 113.6

 

CPI increased to 148.2 in 1994 so cost of book also increases, it will be proportional to CPI increase

 

Cost in 1994 dollars = (148.2/113.6)*17 = $22.17