Table 16-6.The table below applies to an economy with only two goods - hamburgers and hot dogs.The fixed basket consists of 4 hamburgers and 8 hot dogs.

-Refer to Table 16-6.If the base year is 2009,then the consumer price index is

Question

Table 16-6.The table below applies to an economy with only two goods - hamburgers and hot dogs.The fixed basket consists of 4 hamburgers and 8 hot dogs.
 
-Refer to Table 16-6.If the base year is 2009,then the consumer price index is

Quizplus · Accepted Answer

To calculate the consumer price index (CPI), we need to compare the prices of the fixed basket of goods (4 hamburgers and 8 hot dogs) in different years to the prices in the base year 2009.

Year 2009: 
Price of 4 hamburgers = $4 × 4 = $16 
Price of 8 hot dogs = $2 × 8 = $16 
Total cost of fixed basket = $32

Year 2010: 
Price of 4 hamburgers = $5 × 4 = $20 
Price of 8 hot dogs = $3 × 8 = $24 
Total cost of fixed basket = $44

CPI in 2010 = (Total cost of fixed basket in 2010/Total cost of fixed basket in 2009) × 100 
= ($44/$32) × 100 
= 137.5

Year 2011: 
Price of 4 hamburgers = $6 × 4 = $24 
Price of 8 hot dogs = $3.50 × 8 = $28 
Total cost of fixed basket = $52

CPI in 2011 = (Total cost of fixed basket in 2011/Total cost of fixed basket in 2009) × 100 
= ($52/$32) × 100 
= 162.5

Therefore, the CPI was 100 in the base year 2009, 110 in 2010, and 117 in 2011.

The best choice is B.