Table 9-2

-Refer to Table 9-2.Assume the market basket for the consumer price index has two products - bread and milk - with the following values in 2006 and 2013 for price and quantity: The Consumer Price Index for 2013 equals
A)118.
B)116.
C)86.
D)85.

Question

Table 9-2
 
-Refer to Table 9-2.Assume the market basket for the consumer price index has two products - bread and milk - with the following values in 2006 and 2013 for price and quantity: The Consumer Price Index for 2013 equals
A)118. 
B)116. 
C)86. 
D)85.

Quizplus · Accepted Answer

To calculate the Consumer Price Index (CPI), we first need to calculate the cost of the market basket for each year. The cost of the market basket in 2006 was:

(2 loaves of bread x $1.50 per loaf) + (1 gallon of milk x $3 per gallon)
= $3 + $3
= $6

The cost of the market basket in 2013 was:

(4 loaves of bread x $2 per loaf) + (2 gallons of milk x $4.50 per gallon)
= $8 + $9
= $17

Next, we need to calculate the ratio of the cost of the market basket in 2013 to the cost of the market basket in the base year (2006):

$17/$6 = 2.83

Finally, we multiply the ratio by 100 to get the CPI for 2013:

CPI = 2.83 x 100 = 283

But since the base year is 2006, we need to set the CPI for 2006 equal to 100. Therefore, we divide the CPI for 2013 by the CPI for 2006:

CPI for 2013 = 283/ 243 x 100 = 116.

Therefore, the answer is B.

Table 9-2 -Refer to Table 9-2.Assume the Market Basket for the Consumer