Question

Hanna, who is a 5-year-old girl, eats nothing but pasta, yogurt, and lemonade. Each month her parents buy 21 pounds of pasta, 57 packages of yogurt, and 11 bottles of lemonade. These three items make up a basket of goods and services similar to the much larger basket used by the Bureau of Labor Statistics (BLS) when computing the official Consumer Price Index (CPI). The table below lists the average price for each item in this basket for the past four years. Hanna's Meais Pasta (dollars per pound) $1.94 Yogurt (dollars per package) $0.96 1.06 Lemonade (dollars per bottle) $1.94 Year 1.77 2.12 3. 2.17 1.06 1.87 1.97 1.16 1.92 Instructions: Round your answers to two decimal places. a. For each year, calculate the CPI, using year 1 as the base year. In year 1, the CPI was In year 2, the CPI was In year 3, the CPI was In year 4, the CPI was

Answer 1

A. when year 1 is base year

Year 1

Price of pasta = 1.94

Price of yogurt = 0.96

Price of lemonade = 1.94

CPI for year 1 = 1.94 + 0.96 + 1.94 = 4.84

= Prices in year 1 / Prices in Base year * 100

= 4.84 / 4.84 * 100

= 100

Year 2

Price of pasta = 1.77

Price of yogurt = 1.06

Price of lemonade = 2.12

CPI for year 2 = 1.77 + 1.06 + 2.12 = 4.95

= Prices for year 2 / Base year * 100

= 4.95 / 4.84 * 100

= 102.27 (102)

Year 3

Price of pasta = 2.17

Price of yogurt = 1.06

Price of lemonade = 1.87

CPI for year 3 = 2.17 + 1.06 + 1.87 = 5.1

= CPI in year 3 / Base year * 100

=105.37 (105)

Year 4

Price of pasta = 1.97

Price of yogurt = 1.16

Price of lemonade = 1.92

CPI for year 4 = 1.97 + 1.16 + 1.92 = 5.05

= CPI in year 4 / Base year * 100

= 104.33 (104)