Question

The CPI for "personal computers and peripheral equipment" in June 2006 was 10.7 (1982-1984 = 100). Interpret this index.

Answer 1

Answer:

The answer is "Option B"

Step-by-step explanation:

$CPI = 10.7 \ in \ (\ june, \ 2006) \\\\CPI_{2006}= \frac{\ cost \ of \ basket \ of \ year \ 2006}{\ cost \ of \ basket \ of \ year \ 1982 \ to \ 84} \times 100\\\\\frac{10.7}{100} =\frac{\ cost \ of \ basket \ of \ year \ 2006}{\ cost \ of \ basket \ of \ year \ 1982 \ to \ 84}$

The cost of basket $_{1982 \ to 1984} \times 0.107= \ cost \ of \ basket_{2006}$

$\ cost \ of \ basket_{1982 \ to 1984} \ is \ given \ as \ 100\\\therefore \ \ cost \ of \ basket_{2006} = 100 \times 0.107$

                                  $\ = 10.7$

So, the answer is 10.7 % .

Answer 2

Answer:

C. The price of "personal computers and peripheral equipment" decreased 89.3%.

Step-by-step explanation:

Consumer Price Index (CPI) measures change in price level, of weighted average market basket of consumer goods & services produced by households.

CPI calculated change in current year price level with regards to base year price level, base year price = 100. CPI > 100 implies that inflation (price rise) has occurred in current year from base year. CPI < 100 implies that deflation (price fall) has occurred in current year from base year.

CPI for 'personal computers & equipment' = 10.7 implies that prices of 'personal computers & equipment' have fallen or deflated. As per base year price = 100, prices have fallen by 100 - 10.7 = 89.3%