Question

Merryland, there are only goods popcorn movie shows and diet drinks. The following table shows the prices and quantities produced of these in 1980, 1990, and 1991 1980 ро 1.00 500 5.00 300 0.70 300 600 Movie Show Diet Drinks 1.00 10.00 0.80 1.05 10.50 590 210 420 0.75 The RIS es the basket for goods as 5:3:3. Now, we can concentrate on the prices only Base year is 1980 2.1 Calculate the CPI for all the years. CPI for 1980 CPI for 1990 CPI for 1991

Answer 1

1980 is a base year and CPI for base year is always 100.

CPI for 1980 = 100

cost of goods in 1980= 1*5 + 5*3 + 0.7*3= 23.1 hundreds

Cost of goods in 1990= 1*5 + 10*3 + 0.8*3= 37.4 hundreds

CPI for 1990= 37.4*100/23.1= 161.9

Cost of goods in 1991= 1.05*5 + 10.5*3 + 0.75*3 = 39 hundreds

CPI for 1991= 39*100/23.1= 168.83