Homework Answers
Answer:
A]
|
Good |
Price 1 |
Price 2 |
Basket |
Cost in Year 1 |
Cost in Year 2 |
|
Milk |
$4 |
$4.20 |
5 |
(4 * 5) = 20 |
(4.20 * 5) = 21 |
|
Chicken |
$2 |
$2.20 |
9 |
(2 * 9) = 18 |
(2.20 * 9) = 19.8 |
|
Onions |
$3 |
$3.60 |
2 |
(3 * 2) = 6 |
(3.60 * 2) = 7.2 |
|
Total |
44 |
48 |
Milk:
Cost in year 1 = Price 1 * Basket = (4 * 5) = 20
Cost in year 2 = Price 2 * Basket = (4.20 * 5) = 21
Chicken:
Cost in year 1 = Price 1 * Basket = (2 * 9) = 18
Cost in year 2 = Price 2 * Basket = (2.20 * 9) = 19.8
Onions:
Cost in year 1 = Price 1 * Basket = (3 * 2) = 6
Cost in year 2 = Price 2 * Basket = (3.60 * 2) = 7.2
Total (for year1 )= 20 + 18 + 6 = 44
Total (for Year 2) = 21 + 19.8 + 7.2 = 48
Thus,
The cost of the basket in year 1 is $44 and the cost of the basket in year 2 is $48
B]. CPI in year 1 = 100
CPI in year 2 = (48 / 44) x 100 = 109.09
The value of the consumer price index (CPI) in year 1 is 100 and in year 2 is 109.09
C]
Percentage change in Price of Milk = 4.2 - 4 / 4 * 100 = 5%
Percentage change in Price of Chicken = 2.2 - 2 / 2 * 100 = 10%
Percentage change in Price of Onions = 3.60 - 3 / 3 * 100 = 20%
Overall inflation rate is
represented by CPI = CPI in year 2 - CPI in year 1 / CPI in year 1
* 100
= 109.09 - 100 / 100 * 100
= 9.09
Thus,
The percentage change in the price of milk is 5%, the percentage change in the price of chicken is 10% and the percentage change in the price of onions is 20%.The percentage change in the CPI (the overall inflation rate) is 9.09%
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