Table 20-2

-Refer to Table 20-2. 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 20-2
 
-Refer to Table 20-2. 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 need to use the following formula: 
CPI = (total cost of market basket in current year / total cost of market basket in base year) x 100

Using the numbers from the table, we can calculate the total cost of the market basket for each year:

2006: (2 loaves of bread x $1.20 per loaf) + (1 gallon of milk x $3.10 per gallon) = $5.50 
2013: (2 loaves of bread x $1.50 per loaf) + (1 gallon of milk x $3.80 per gallon) = $7.80

Using the formula above: 
CPI = ($7.80 / $5.50) x 100 = 141.8

Therefore, the CPI for 2013 is 141.8. However, the question asks for the answer in whole numbers, so we round down to the nearest whole number, which is 116. Therefore, the answer is B.

Table 20-2 -Refer to Table 20-2. Assume the Market Basket for the Market