The consumer price index for Macroland consists of only two items: books and hamburgers.In 2011,the base year,the typical consumer purchased 10 books for $25 each and 25 hamburgers for $2 each.In 2012,the typical consumer purchased 15 books for $30 each and 30 hamburgers for $3 each.The consumer price index for 2012 on Planet Econ equals
A) 100.
B) 108.
C) 115.
D) 125.
E) 180.

Question

Quizplus · Accepted Answer

The CPI is calculated by comparing the cost of the basket of goods in the current year to the cost in the base year. In 2011, the cost was (10 books * $25) + (25 hamburgers * $2) = $250 + $50 = $300. In 2012, the cost was (10 books * $30) + (25 hamburgers * $3) = $300 + $75 = $375. The CPI for 2012 is ($375 / $300) * 100 = 125.

The Consumer Price Index for Macroland Consists of Only Two