Question

The Bureau of Labor Statistics has found that the base-year expenditures of the typical consumer break down as follows:

Food and beverages	17.8%
Housing	42.8%
Apparel and upkeep	6.3%
Transportation	17.2%
Medical care	5.7%
Entertainment	4.4%
Other goods, and services	5.8%
Total	100.0%

Suppose that since the base year, the prices of food and beverages have increased by 10 percent, the price of housing has increased by 5 percent, and the price of medical care has increased by 10 percent. Other prices are unchanged.

Instructions: Enter your responses by rounding the CPI to three decimal places.

The CPI for the current year is ____.

Answer 1

Answer: The CPI for the current year is 104.49

Items	Base year	Current year
Food and beverages	17.8%	19.58%
Housing	42.8%	44.94%
Apparel and upkeep	6.3%	6.3%
Transportation	17.2%	17.2%
Medical care	5.7%	6.27%
Entertainment	4.4%	4.4%
Other goods, and services	5.8%	5.8%
Cost of basket	100.0%	104.49%

Calculation:

Prices of food and beverages have increased by 10% = 17.8 + (17.8*10%) = 17.8 + 1.78 = 19.58%

Price of housing has increased by 5% = 42.8 + (42.8*5%) = 42.8 + 2.14 = 44.94%

Price of medical care has increased by 10% = 5.7 + (5.7*10%) = 5.7 + 0.57 = 6.27%