The following table shows the consumption categories used to compute the consumer price index in a hypothetical economy, their weights as percentages in a typical consumer's total expenditure, and the price ratios relative to the base year.

a) Calculate the consumer price index in Year 1 and Year 2.
b) Calculate the inflation rate in Year 1 and Year 2.
c) Explain how the weights in column 2 were determined. Discuss the meaning of "Price of food."

Question

The following table shows the consumption categories used to compute the consumer price index in a hypothetical economy, their weights as percentages in a typical consumer's total expenditure, and the price ratios relative to the base year.

a) Calculate the consumer price index in Year 1 and Year 2.
b) Calculate the inflation rate in Year 1 and Year 2.
c) Explain how the weights in column 2 were determined. Discuss the meaning of "Price of food."

Quizplus · Accepted Answer

The Answer of The following table shows the consumption categories used to compute the consumer price index in a hypothetical economy, their weights as percentages in a typical consumer's total expenditure, and the price ratios relative to the base year.

a) Calculate the consumer price index in Year 1 and Year 2.
b) Calculate the inflation rate in Year 1 and Year 2.
c) Explain how the weights in column 2 were determined. Discuss the meaning of "Price of food."

The Following Table Shows the Consumption Categories Used to Compute