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10 May, 10:45

Suppose the market basket consists of 400X, 150Y, and 220Z. Current-year prices are $1.50 for each unit of X, $0.50 for each unit of Y, and $4.60 for each unit of Z. Base-year prices are $1.00 for each unit of X, Y, and Z. Approximately what is the value of the CPI in the current year?

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  1. 10 May, 14:00
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    219.09

    Explanation:

    Product Quantity (Weight) Base-year price Current-year price

    X 400 1.00 1.50

    Y 150 1.00 0.50

    Z 220 1.00 4.60

    CPI = Cost of market basket in Current Period x 100

    Cost of market basket in Base Period

    CPI = 400 * 1.50 + 150 * 0.50 + 220 * 4.60 x 100

    400 * 1.00 + 150 * 1.00 + 220 * 1.00

    CPI = 1,687.00 x 100

    770.00

    CPI = 2.19 x 100

    CPI = 219.09
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