Answer:
CPI in 2020 =142.7
CPI in 2019 = 100
Explanation:
Inflation is the increase in the general price level. Inflation erodes the value of money.
<em>Consumer Price Index(CPI ): This is the weighted average price of a basket of goods and services consumed by a typical consumer. It is used to measure the rate of inflation.</em>
The increase in the CPI is taken to be the rate of inflation. For example, the CPI rose to 1.09 from 1.00, this implies an inflation rate of 9% within the time period in focus.
The CPI =
The price of a basket of goods in a current year ÷ Divided by the price of a basket of goods in a base year
The consumer price
CPI in 2019 = (1000× $2) + (100× $50) + ( 500× $$0.10)= 7050
CPI in 2020= (1000× $2.50) + (100× $75) + ( 500× $$0.12)=10,060
CPI in 2020 = 10,060/7050× 100 =142.7
CPI in 2019 = 100
CPI in 2020 =142.7
CPI in 2019 = 100
Note , we assume the CPI for 2019 is 100, since we were not provided with data to compute the price of a basket of good in 2018