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30 November, 21:48

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?

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  1. 30 November, 23:44
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    D. $37.11

    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
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