Consumer price index = $\frac{Price of basket of goods and services in base year}{Price of basket in current year}$* 100.

Question

Quizplus · Accepted Answer

The formula for the consumer price index should be

Consumer price index = (Price of basket of goods and services in current year/Price of basket in base year) x 100.

The given formula is incorrect as it divides the base year price by current year price which gives a value greater than 1, resulting in a CPI greater than 100.

Consumer Price Index = PriceofbasketofgoodsandservicesinbaseyearPriceofbasketincurrentyear\frac{Price of basket of goods and services in base year}{Price of basket in current year}PriceofbasketincurrentyearPriceofbasketofgoodsandservicesinbaseyear​

Consumer Price Index = $\frac{Price of basket of goods and services in base year}{Price of basket in current year}$