Question

4. Two tables below show the purchases of an average consumer in a small economy. Assume...

4. Two tables below show the purchases of an average consumer in a small economy. Assume that these consumers purchase only drinks and foods and suppose that 2017 is the base year.

Items

Quantity

(2017)

Price

(2017)

Drinks

25

MYR 2.35

Foods

15

MYR 7.50

Items

Quantity

(2018)

Price

(2018)

Drinks

25

MYR 2.50

Foods

15

MYR 7.75

a. Determine the cost of the market basket in 2017 and 2018.

  • For 2017 : (RM2.35x25) + (rm7.50x15)

58.75+112.50

=RM171.25

  • For 2018 : (rm2.5x25) + (rm7.75x15)

62.50 + 116.25

=RM178.75

b. Determine the consumer price index (CPI) in 2017 and in 2018.

…………………………………………………………………………………………………..

…………………………………………………………………………………………………..

…………………………………………………………………………………………………..

c. Determine the inflation rate between 2017 and 2018.

…………………………………………………………………………………………………..

…………………………………………………………………………………………………..

…………………………………………………………………………………………………..

Business   Economics   
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Homework Answers

Answer #1

a)

Cost of market basket in 2017=2.35*25+7.50*15=MYR 171.25

Cost of market basket in 2018=2.50*25+7.75*15=MYR 178.75

b)

CPI in 2017=(Cost of market basket in 2017/Cost of market basket in base year)*100

CPI in 2017=(171.25/171.25)*100=100.00

CPI in 2018=(Cost of market basket in 2018/Cost of market basket in base year)*100

CPI in 2017=(178.75/171.25)*100=104.38

c)

Inflation rate between 2017 and 2018=(CPI in 2018-CPI in 2017)/CPI in 2017

Inflation rate between 2017 and 2018=(104.38-100)/100 =4.38%

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