In 1990, when the consumer price index (CPI) was 130.7, Deena purchased a house for $98,700. Assuming that the price of houses increased at the same rate as the CPI from 1980 to 1990, approximately how much would the house have cost in 1980, when the CPI was 82.4?

Question

anonymous · Answer

A. 	$72,650
  		B. 	$62,200
  		C. 	$67,600
  		D. 	$84,600

wolfe8 · Answer

Alright so you have the CPI at

1980: 82.4
1990: 130.7

and price in 
1980: ?
1990: 98,700

It says that we assume the rate increase for both is the same, we can find the rate increase in price by finding the rate increase in CPI from 1980-90(latest value over original value). 

130.7/82.4 = ?

Now you have the price increase from 1980 to 1990 but you are given the price at 1990. So what will you do?

anonymous · Answer

is it D ?

wolfe8 · Answer

No. Do you understand the workings?

anonymous · Answer

no

anonymous · Answer

this is my last question im so sleepy

wolfe8 · Answer

Ok so when people say rate, it is the ratio of the later value over the former value. So if they say rate of CPI from 1980 to 1990, it is the ratio of 1990's CPI over 1980's CPI. And that is equal to the rate of 1990's price over 1990's price.

anonymous · Answer

whats the answer ?

wolfe8 · Answer

I usually don't give answers directly but since you said you're sleepy, it's B. But I very much would like you to understand how to get that answer so it will help you next time.

anonymous · Answer

thank you very much