Question
a. Give a definition of the CPI and discuss how it is computed (4 marks) Suppose...
a. Give a definition of the CPI and discuss how it is computed
Suppose an economy has only three goods and the typical family purchases the amounts given in the following table. The base year is 2012.
|
Product |
Quantity (2012) |
Price (2012) |
Price (2017) |
|
Hair cuts |
6 |
$50 |
$80 |
|
Backpacks |
4 |
$25 |
$30 |
|
Tacos |
100 |
$1.00 |
$5.00 |
b. Compute the cost of consumption basket in 2012 and 2017 using base year quantities.
c. What is the CPI for in 2017?
d. What is the inflation rate between 2012 and 2017?
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