-The CPI basket contains 400 oranges and 800 pens. In the base year, the price of an orange is $1.00 and the price of a pen is $0.75. This year, urban consumers each buy 300 oranges at $2.00 each and 850 pens at $1.00 each. The CPI this year is
A) 1.60.
B) 62.5.
C) 160.
D) 140.

Question

-The CPI basket contains 400 oranges and 800 pens. In the base year, the price of an orange is $1.00 and the price of a pen is $0.75. This year, urban consumers each buy 300 oranges at $2.00 each and 850 pens at $1.00 each. The CPI this year is
A) 1.60. 
B) 62.5. 
C) 160. 
D) 140.

Quizplus · Accepted Answer

The CPI is calculated by comparing the cost of the basket in the current year to the cost in the base year. Base year cost = (400 oranges * $1) + (800 pens * $0.75) = $1000. Current year cost = (400 oranges * $2) + (800 pens * $1) = $1600. CPI = (Current year cost / Base year cost) * 100 = (1600 / 1000) * 100 = 160.

-The CPI Basket Contains 400 Oranges and 800 Pens