Question

The people on Coral Island buy only juice and cloth. The CPI basket contains the quantities bought in 2013. The average household spent ​$6060 on juice and ​$3030 on cloth in 2013 when the price of juice was ​$22 a bottle and the price of cloth was ​$55 a yard. In​ 2014, juice is ​$44 a bottle and cloth is ​$66 a yard. Calculate the CPI basket and the percentage of the​ household's budget spent on juice in 2013.

Answer 1

Answer: CPI for 2014 is given as;

For juice = 100% or 1

For clothes = 20% or 0.2

Percentage of budget spent on juice in 2013 = 66.67%

Explanation:

For 2013

total money spent;

Juice = $6060

Clothes = $3030

Price per bottle of juice = $22

Price per yrd of clothe = $55

For 2014

Price per bottle of juice = $44

Price per yrd of clothe = $66

CPI = ( price(current yr)/price(base yr) x 100%) - 100%

For juice CPI = 44/22 x 100 = 200%

CPI = 200% - 100% = 100%

For clothe CPI = 66/55 x 100% = 120%

CPI = 120 - 100 = 12%

Total expenditure for 2013 = $6060 + $3030 = $9090

Percentage of budget spent on juice in 2013 = 6060/9090 x 100%

= 66.67%

Answer 2

Answer:

a. 2013 CPI basket is $9,090

b. The percentage of household's budget spent on juice in 2013 is 66.67%.

Explanation:

a. Calculate the CPI basket and the percentage

CPI basket for a year is the summation of the average total amount spent on all goods in the basket. Therefore, we have:

2013 Bottles of juice = $6,060 ÷ $22 = 275.45 bottles

2013 Yards of cloth = $3,030 ÷ $55 = 55.09  yards

2013 CPI basket = $6,060 + $3,030 = $9,090

b. Calculate the​ percentage of household's budget spent on juice in 2013.

Juice share in budget = ($6,060 ÷ $9,090) × 100 = 66.67%

Therefore, the percentage of household's budget spent on juice in 2013 is 66.67%.