A consumer expenditure survey reports the following information on consumer protein spending: Using 2005 as the base year, by how much does a "cost of protein" index increase between 2005 and 2006?

Question

A consumer expenditure survey reports the following information on consumer protein spending:  Using 2005 as the base year, by how much does a "cost of protein" index increase between 2005 and 2006?

Quizplus · Accepted Answer

First, note that in the computation of the CPI, the basket of goods and services is fixed - so the quantities remain the same as in the base year. The protein cost in 2005 was (5 × $5) + (10 × $3) + (7 × $6) = $97. Protein cost in 2006 was (5 × $7) + (10 × $4) + (7 × $5) = $110, so the protein price index is 1.134, or an increase of 13.4 percent.

A Consumer Expenditure Survey Reports the Following Information on Consumer