Question

3. Suppose the market basket consists of 100X, 200 Y, and 300Z, Current-year prices are to cach unit of X, $2 for each unit of Y. and $3 for each unit of Z. Base-year prices are for each unit of X, Y, and Z. What is the approximate CPI in the current year? A. 15 B. 70.20 C. 1,200 D. 150

Answer 1

CPI formula

= (Cost of the goods at the current price / Cost of the goods at Base year price)*100

In the give question the goods are X,Y and Z. The current year quantity is 100, 200 and 300.

The current year price is $5, $2 and $3 respectively. Current year cost is

(100*$5)+(200*$2)+(300*$3)=$1800

The base year price is same for all the goods=$2 for X,Y,Z

Cost as per base year price

=(100*$2)+(200*$2)+(300*$2)=$1200

CPI = 1800/1200*100=150

Answer -d) 150