Answer:
Vegopia
Consumer Price Index
1. Using 2020 as the base year, the CPI for 2020 is 100, and the CPI for 2021 is 122.
2. The inflation rate in 2021 is 22% using the CPI.
Explanation:
a) Data and Calculations:
In 2020:
Amount spent for 100 heads of cauliflower = $250, each $2.50
Amount spent for 50 bunches of broccoli = $100, each $2.00
Amount spent for 500 carrots = $250, each $0.50
In 2021:
Amount spent for 60 heads of cauliflower = $210, each $3.50
Amount spent for 90 bunches of broccoli = $180, each $2.00
Amount spent for 450 carrots = $270, each $0.60
Year Cauliflower Broccoli Carrots Basket
2020 $2.50 $2.00 $0.50 $5.00
2021 $3.50 $2.00 $0.60 $6.10
Change $1.00 $0.00 $0.10 $1.10
CPI index = $1.10/$5.00 + 1 * 100 = 122
Inflation rate = 122 - 100 = 22%
b) The Consumer Price Index (CPI) of Vegopia measures the weighted average of prices of a basket of consumer goods and services in Vegopia, such as transportation, food, and medical care. It averages the price changes for each item in the predetermined basket of goods. The changes in the CPI assess the price changes associated with the cost of living. As one of the most frequently used statistics, the CPI is used to identify periods of inflation or deflation in Vegopia.
