The following table shows the consumption goods categories that Statistics Canada uses to compute the consumer price index, their weights as percentages in a typical consumer's total expenditure, as well as some hypothetical prices of those generic goods. Since the weights are adjusted such that their sum is 100, the year 1 prices are given as price ratios p¹/p⁰, where p⁰ is the base year price.

a.Calculate the consumer price index in Year 1 and Year 2.
b.Calculate the inflation rate in Year 1, Year 2, and between Year 1 and Year 2.
c.Explain how the weights in column 2 were determined. Discuss the meaning of "Price of food."

Question

The following table shows the consumption goods categories that Statistics Canada uses to compute the consumer price index, their weights as percentages in a typical consumer's total expenditure, as well as some hypothetical prices of those generic goods. Since the weights are adjusted such that their sum is 100, the year 1 prices are given as price ratios p¹/p⁰, where p⁰ is the base year price.

a.Calculate the consumer price index in Year 1 and Year 2.
b.Calculate the inflation rate in Year 1, Year 2, and between Year 1 and Year 2.
c.Explain how the weights in column 2 were determined. Discuss the meaning of "Price of food."

Quizplus · Accepted Answer

The Answer of The following table shows the consumption goods categories that Statistics Canada uses to compute the consumer price index, their weights as percentages in a typical consumer's total expenditure, as well as some hypothetical prices of those generic goods. Since the weights are adjusted such that their sum is 100, the year 1 prices are given as price ratios p¹/p⁰, where p⁰ is the base year price. a.Calculate the consumer price index in Year 1 and Year 2. b.Calculate the inflation rate in Year 1, Year 2, and between Year 1 and Year 2. c.Explain how the weights in column 2 were determined. Discuss the meaning of "Price of food."

The Following Table Shows the Consumption Goods Categories That Statistics