Question

A basket of goods and services is used to calculate CPI. Assume that the basket contains 5 toothbrushes and 2 tubes of toothpaste. The prices for those goods are shown in the table.

Year Toothbrush Tube of Toothpaste
year 1 $1.00 each $2.00 each
year 2 $1.25 each $2.10 each

What will the CPI for year 2 be?

A.
9.00
B.
10.45
C.
86.00
D.
116.11

Answer 1

The Consumer Price Index for the year 2 be 116.11.

How do we calculate Consumer Price Index?

This is calculated by adding together a sampling of product prices from a previous year.

We then add together the current prices of the same products and divide the total of current prices by the old prices, then multiply the result by 100.

Given data

Year 1 = $9

Year 2 = $10.45

Year 2 / Year 1 = $10.45 / $9.00

Year 2 / Year 1= 1.6111

CPI for year 2 = 1.61 x 100

CPI for year 2 = 116.11

Therefore, the Option D is correct.

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