Question

Assume the market basket contains 20X, 30Y, and 50Z. The current-year prices for goods X, Y, and Z are $2, $6, and $10, respectively. The base-year prices are $1, $3, and $5, respectively. What is the CPI in the current year?

Answer 1

Answer:

CPI for the current year  = 200

Explanation:

Given;

Contents in market basket

20X, 30Y, and 50Z

The current-year prices for goods

X = $2

Y = $6

Z = $10

The base-year prices are

X = $1

Y = $3

Z = $5

Now,

Total cost of market basket in the current year

= ∑ (Quantity × Price)

= 20 × $2 + 30 × $6 + 50 × $10

= $40 + $180 + $500

= $720

Total cost of market basket in the base year

= ∑ (Quantity × Price)

= 20 × $1 + 30 × $3 + 50 × $5

= $20 + $90 + $250

= $360

also,

CPI for the current year = $\frac{\textup{Cost of market basket at current year prices}}{\textup{Cost of market basket at base year prices}}\times100$

or

CPI for the current year = $\frac{\ 720}{\ 360}\times100$

or

CPI for the current year = 200