Question

The market used to calculate the CPI is 3 units of pork and 4 unit of corn. In 2005, pork cost $20 per pound and corn cost $12 per ear. In 2006, pork cost $25 per pound and corn cost $18 per ear. What is the inflation rate for 2006 if the base year is 2005?

Answer 1

Answer:

The answer will be 136.11

Explanation:

Because since the cost of the basket in 2005 is = (3x20) + (4 x 12) = 108; And the cost of basket in 2006 is = (3x25) + (4 x 18) = 147

To calculate the CPI,

• Put a sampling of product prices from a previous year.
• Then, put the current prices of the same items together.
• Divide the current total prices by the old prices and then subtract the sum by 100.

The Consumer Price Index (CPI) for 2006 = (147/108) x 100 = 136.11