Question

Suppose the fixed basket of goods used to calculate the CPI consists of 4 units of good A, 3 units of good B, and 2 units of good C. From year 1 to year 2 the prices of the goods changed as shown in the table. Year 1 is the base year.

	Price in year 1	Price in year 2
Good A	$2.50	$2.80
Good B	$3.50	$3.71
Good C	$5.80	$6.67

The cost of the basket in year 1 is $

The cost of the basket in year 2 is $  

The CPI value in year 1 is

The CPI value in year 2 is

Enter numbers rounded to two decimal places.

Answer 1

Calculation of the cost of the basket in Year 1 -

Calculation of the cost of the basket in Year 2 -

Calculation of CPI value in year 1 -

Consumer Price Index (CPI) = Cost of market basket in Year 1/Cost of market in year 1*100

as base year is Year 1

CPI = 32.10/32.10*100

= 100

Calculation of CPI value in year 2 -

Consumer Price Index = Cost of market basket in Year 2/Cost of market basket in Year 1*100

= 35.67/32.10*100

= 111.12

Please check with your answer and let me know.