Suppose the market basket consists of 100X,200Y,and 300Z.Current-year prices are $5 for each unit of X,$2 for each unit of Y,and $3 for each unit of Z.Base-year prices are $2 for each unit of X,Y,and Z.What is the approximate CPI in the current year?
A) 15
B) 70.20
C) 1,200
D) 150

Question

Quizplus · Accepted Answer

The Consumer Price Index (CPI) is calculated by taking the current year's total cost of goods and dividing it by the base year's total cost of goods, then multiplying by 100. For the current year, the total cost is (100X * $5) + (200Y * $2) + (300Z * $3) = $500 + $400 + $900 = $1,800. For the base year, the total cost is (100X * $2) + (200Y * $2) + (300Z * $2) = $200 + $400 + $600 = $1,200. Therefore, CPI = ($1,800 / $1,200) * 100 = 150.

Suppose the Market Basket Consists of 100X,200Y,and 300Z