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Chapter 4 Review Exercises

Chapter 4 Review Exercises
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  • 7. Natural Gas Inflation

    The table shows the natural gas price index of natural gas delivered to residential consumers in the United States. Consumers are charged per thousand cubic feet. (Note: The base year is 1983.) Was inflation of natural gas the highest in the 1970s, 1980s, or 1990s? Explain your reasoning.

    • Worked-Out Solution

      One way to answer this question is to use a spreasheet to graph the data.

       

      In the 1970s, the CPI for natural gas increased about 50 units. In the 1980s and 1990s, it increased less than that. So, inflation of natural gas was highest in the 1970s.

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       _____   _    _     ______     ___       _____  
      / ___// | || | ||  /_____//   / _ \\    / ___// 
      \___ \\ | || | ||  `____ `   / //\ \\   \___ \\ 
      /    // | \\_/ ||  /___//   |  ___  ||  /    // 
     /____//   \____//   `__ `    |_||  |_|| /____//  
    `-----`     `---`    /_//     `-`   `-` `-----`   
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  • 8. Decreasing Natural Gas Prices

    The table shows the natural gas price index of natural gas delivered to residential consumers in the United States. Consumers are charged per thousand cubic feet. (Note: The base year is 1983.) During which years did the price of natural gas decrease?

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      ____       ___                _____   __    __  
     |  _ \\    / _ \\      ___    |  ___|| \ \\ / // 
     | |_| ||  / //\ \\    /   ||  | ||__    \ \/ //  
     | .  //  |  ___  ||  | [] ||  | ||__     \  //   
     |_|\_\\  |_||  |_||   \__ ||  |_____||    \//    
     `-` --`  `-`   `-`     -|_||  `-----`      `     
                             `-`                      
    
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  • 9. Graphing the Natural Gas Price Index

    The table shows the natural gas price index of natural gas delivered to residential consumers in the United States. Consumers are charged per thousand cubic feet. (Note: The base year is 1983.) Graph the natural gas price index from 1967 through 2009. Use the graph to describe the rate of inflation for natural gas.

    • Worked-Out Solution

      An easy way to graph the data is to use a spreadsheet.

      The price of natural gas has been through 3 periods of growth.

      (a) From 1967 to 1983, the price was increasing each year.

      (b) From 1983 to 1999, the price was relatively constant.

      (c) From 1999 to 2006, the price was increasing each year.

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     _____     __   __    _____    __   __  __    __  
    |  __ \\   \ \\/ //  /  ___||  \ \\/ // \ \\ / // 
    | |  \ ||   \ ` //  | // __     \ ` //   \ \/ //  
    | |__/ ||    | ||   | \\_\ ||    | ||     \  //   
    |_____//     |_||    \____//     |_||      \//    
     -----`      `-`'     `---`      `-`'       `     
                                                      
    
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  • 10. Comparing Rates of Inflation

    The table shows the natural gas price index of natural gas delivered to residential consumers in the United States. Consumers are charged per thousand cubic feet. (Note: The base year is 1983.) Compare the rate of inflation for natural gas to the rate of inflation represented by the consumer price index.

    data folder

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      _____    __   __   _____      ______   __   _   
     / ____||  \ \\/ // |  __ \\   /_   _// | || | || 
    / //---`'   \ ` //  | |  \ ||   -| ||-  | '--' || 
    \ \\___      | ||   | |__/ ||   _| ||_  | .--. || 
     \_____||    |_||   |_____//   /_____// |_|| |_|| 
      `----`     `-`'    -----`    `-----`  `-`  `-`  
                                                      
    
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  • 11. Finding the Price of Natural Gas

    The table shows the natural gas price index of natural gas delivered to residential consumers in the United States. Consumers are charged per thousand cubic feet. (Note: The base year is 1983.) In 2009, the average price of natural gas per thousand cubic feet was $12.14. What was the price in 1970?

    • Worked-Out Solution

      Use the formula from Section 4.2.

      So, the price of natural gas in 1970 was about $1.09 per 1000 cubic feet.

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      _  __   _    _               ______    ____    
     | |/ // | || | ||   ____     /_   _//  |  _ \\  
     | ' //  | || | ||  |    \\    -| ||-   | |_| || 
     | . \\  | \\_/ ||  | [] ||    _| ||_   | .  //  
     |_|\_\\  \____//   |  __//   /_____//  |_|\_\\  
     `-` --`   `---`    |_|`-`    `-----`   `-` --`  
                        `-`                          
    
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  • 12. Finding the Price of Natural Gas

    The table shows the natural gas price index of natural gas delivered to residential consumers in the United States. Consumers are charged per thousand cubic feet. (Note: The base year is 1983.) In 2006, the average price of natural gas per thousand cubic feet was $13.73. What was the price in 1983?

    data folder

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       _____   _    _    _    _      ___      _____   
      / ___// | || | || | \  / ||   / _ \\   /  ___|| 
      \___ \\ | || | || |  \/  ||  | / \ || | // __   
      /    // | \\_/ || | .  . ||  | \_/ || | \\_\ || 
     /____//   \____//  |_|\/|_||   \___//   \____//  
    `-----`     `---`   `-`  `-`    `---`     `---`   
                                                      
    
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  • 13. Natural Gas

    Would you rather pay a natural gas bill of $115.50 in 2004 or $92.35 in 1990? Explain your reasoning.

    • Worked-Out Solution

      Begin by making a table that compares the Consumer Price Index with your natural gas bill. (Note: Use the regular Consumer Price Index, not the CPI for Natural Gas.)

      From 1990 to 2004, the CPI had a percent increase of

      From 1990 to 2004, your natural gas bill had a percent increase of

      So, your natural gas bill increased by a smaller percent than the general rate of inflation.

      This means that you would be better paying a bill of $115.50 in 2004 than a bill of $92.35 in 1990.

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     __   __     ___      ______   _    _    _    _   
     \ \\/ //   / _ \\   /_   _// | || | || | || | || 
      \   //   / //\ \\  `-| |,-  | || | || | || | || 
      / . \\  |  ___  ||   | ||   | \\_/ || | \\_/ || 
     /_//\_\\ |_||  |_||   |_||    \____//   \____//  
     `-`  --` `-`   `-`    `-`'     `---`     `---`   
                                                      
    
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  • 14. Comparing Price Index with Dollar Amounts

    Do you think using a price index to compare prices between years is better than using a dollar amount? Explain your reasoning.

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      _  __    _____      _____    ______    ______  
     | |/ //  |  ___||   / ___//  /_   _//  /_____// 
     | ' //   | ||__     \___ \\   -| ||-   `____ `  
     | . \\   | ||__     /    //   _| ||_   /___//   
     |_|\_\\  |_____||  /____//   /_____//  `__ `    
     `-` --`  `-----`  `-----`    `-----`   /_//     
                                            `-`      
    
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