If the price of housing (which accounts for 40% of total expenditures in the CPI basket), rises by 10% in one year while the prices of all other goods rises by 27%, by how much will the CPI rise?

Question

Quizplus · Accepted Answer

The CPI rise is a weighted average of the price increases. Housing accounts for 40% of the CPI, so its contribution to the CPI increase is 0.4 * 10% = 4%. The remaining 60% of the CPI basket rises by 27%, contributing 0.6 * 27% = 16.2%. Therefore, the total CPI increase is 4% + 16.2% = 20.2%, which rounds to 20%.

If the Price of Housing (Which Accounts for 40% of Total