Question

Assume that apples cost $0.60 in 2002 and $1 in 2009, whereas oranges cost $1 in 2002 and $0.70 in 2009. If the household consumption bundle included 10 apples and 5 oranges in 2002 and 5 apples and 10 oranges in 2009, then the CPI for 2002 using 2009 as the base year is A. 12.1 B. 13.0 C. 13.5 D. None of the above

Answer 1

Answer: 91.67

Explanation:

Consumer Price Index₂₀₀₂ = ( Basket Price in Year of interest₂₀₀₂ / Basket Price in Base year₂₀₀₉) * 100

Basket Price in 2002 = (10 * 0.6) + (5 * 1)

= $11

Basket Price in 2009 = (5 * 1) + (10 * 0.7)

= $12

Consumer Price index = 11/12 * 100

= 91.67