Question

The monthly market basket for consumers consists of pizza, t-shirts, and rent.


The monthly market basket for consumers consists of pizza, t-shirts, and rent. 


The table below shows market basket quantities and prices for the base year (Year 1) and in the following year. 


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In Year 1, the CPI for the economy is _______ 

In Year 2, the CPI for this economy is _______ 

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Answer #1

Cost of the market basket in year 1 = 20*3+3*15+1*500 = 605

CPI in year 1 = 100

Cost of the market basket in year 2 = 20*3.75+3*13.5+1*550 = 665.5

Cost of the market basket in base year price in year 2 = 20*3+3*15+1*500 = 605

CPI in year 2 = 665.5/605 = 110

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