If the cost of transportation and the cost of food both increase by 25 percent,then,other things the same,how much is the CPI likely to increase?

Question

Quizplus · Accepted Answer

To find the percentage increase in CPI, we need to use the formula:
CPI increase = (Weighted average of price changes/Original CPI) x 100

Let's assume that transportation and food have equal weight in the CPI basket (i.e., 50% weight each). Then, the overall CPI increase would be:

CPI increase = [(25% x 50%) + (25% x 50%)] / 100% x 100

CPI increase = 12.5%

Therefore, the CPI is likely to increase by about 9% (rounded off to the nearest whole number).

If the Cost of Transportation and the Cost of Food