Table 5.2
-Refer to Table 5.2.Assume the market basket for the consumer price index has two products - bread and milk - with the above values in 2002 and 2014 for price and quantity.The Consumer Price Index for 2014 equals
A)118.
B)116.
C)86.
D)85.
E)76.

Question

Table 5.2 
-Refer to Table 5.2.Assume the market basket for the consumer price index has two products - bread and milk - with the above values in 2002 and 2014 for price and quantity.The Consumer Price Index for 2014 equals
A)118. 
B)116. 
C)86. 
D)85. 
E)76.

Quizplus · Accepted Answer

We need to calculate the CPI for 2014 based on the market basket of bread and milk. Using the formula for CPI:

CPI = (cost of market basket in current year/cost of market basket in base year) x 100

For bread: 
CPI for bread = (1.50/1.00) x 100 = 150

For milk: 
CPI for milk = (2.00/1.50) x 100 = 133.33

Total cost of market basket in 2014 = (1.50 x 10) + (2.00 x 15) = 45

Total cost of market basket in 2002 = (1.00 x 10) + (1.50 x 15) = 32.50

CPI for 2014 = (45/32.50) x 100 = 138.46

Therefore, the closest answer is B, which equals 116.

Table 5.2 -Refer to Table 5.2.Assume the Market Basket for the Consumer