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Use the information in the table to calculate a consumer price index (CPI) and the inflation...

Use the information in the table to calculate a consumer price index (CPI) and the inflation rate. The base year is 1975. Round answers to two decimal places. Market basket Quantity 1975 prices 1976 prices A dozen eggs 21 $0.50 $0.90 Calculator 11 $10.50 $14.00 Microwave oven 2 $130.00 $150.00 What is the CPI for 1975? 1.41 What is the CPI for 1976? 1.17 What is the inflation rate for 1976? %

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Answer #1
Quantity 1975 Prices 1976 Prices
Egg 21 $ 0.50 $ 0.90
Calculator 11 $ 10.50 $ 14.00
Microwave Oven 2 $ 130.00 $ 150.00

Market Basket at base price = 21*0.50 + 11*10.50+2*130

= 10.50 + 115.50 + 260

= $ 386

CPI of base year 1975

costofmarketbasket1975 marketbasketbaseyear CPI1975 k 100

386 CP 11975-356 100 100

Calculation of CPI 1976

First calculate market basket cost using quantity of base year

Market Basket 1976 = 21*0.90+11*14 + 2*150

= 18.90 + 154 + 300

= $ 472.90

472.9 1976100 122.51 386

Inflation

In flation,-1976 С PĪ 1976-С Р「-1975 C PI1975

122.51- 100 Inflation, - 100 100

Inflation = 22.51%

Please contact if having any query thank you.

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