Assume that apples cost $0.50 in 2002 and $1 in 2009, whereas oranges cost $1 in 2002 and $0.50 in 2009. If 10 apples and 5 oranges were purchased in 2002, and 5 apples and 10 oranges were purchased in 2009, the CPI for 2009, using 2002 as the base year, is:
A)0.75.
B)0.80.
C)1.
D)1.25.

Question

Quizplus · Accepted Answer

To calculate the CPI, we first need to find the cost of the basket of goods (10 apples and 5 oranges) in both 2002 and 2009.
In 2002, the cost of the basket was: 
(10 * $0.50) + (5 * $1) = $5.00

In 2009, the cost of the basket was:
(5 * $1) + (10 * $0.50) = $7.50

Now, using 2002 as the base year, we can calculate the CPI:
CPI = (Cost of basket in current year / Cost of basket in base year) * 100
CPI = ($7.50 / $5.00) * 100
CPI = 150

Therefore, the CPI for 2009 using 2002 as the base year is 1.5 or 150%, meaning that prices have increased by 50% since 2002. To convert this to a decimal, we divide by 100, giving us a final answer of 1.5. However, none of the given answer choices match this result, so the closest option is D) 1.25, which is the result we would get if we calculated the CPI using 2009 as the base year (which is not what the question is asking for).

Assume That Apples Cost $0