Table 6-5
The table below pertains to an economy with only two goods-books and calculators. The fixed basket consists of 5 books and 10 calculators.

-Refer to Table 6-5. Using 2006 as the base year, what is the consumer price index?

Question

Table 6-5
The table below pertains to an economy with only two goods-books and calculators. The fixed basket consists of 5 books and 10 calculators.
 
-Refer to Table 6-5. Using 2006 as the base year, what is the consumer price index?

Quizplus · Accepted Answer

To find the Consumer Price Index (CPI), we need to use the formula: 
CPI = (cost of fixed basket in a given year / cost of fixed basket in base year) x 100

Using the given data, we can calculate the CPI for each year:
CPI in 2005 = (($190 + $200) / ($185 + $180)) x 100 = 98.3
CPI in 2006 = (($220 + $250) / ($185 + $180)) x 100 = 100
CPI in 2007 = (($250 + $275) / ($185 + $180)) x 100 = 107.4

Therefore, the CPI values for the base year 2006 is 100. Option (B) is the only choice that lists this value as the CPI for 2006, and also lists the correct CPI values for 2005 and 2007.

Table 6-5 The Table Below Pertains to an Economy with Only Two