Question

Ethel purchased a bag of groceries in 1970 for $8. She purchased the same bag of groceries in 2006 for $25. If the price index was 38.8 in 1970 and the price index was 180 in 2006, then what is the price of the 1970 bag of groceries in 2006 dollars?

Answer 1

D. $37.11

Step-by-step explanation:

Given that

Price of grocery bag in 1970 = 8

Price index in 1970 = 38.8

Price index in 2006 = 180

Thus,

Price if grocery bag in 2006

= price in 1970 × (Price index 2006 ÷ price index 1970)

= 8 × (180 ÷ 38.8)

= 8 × 4.639

= 37.112

= $37.11