Homework SourseTable 242 The table above pertains to Pieway an economy in w
Table 24-2 The table above pertains to Pieway, an economy in which the typical consumer’s basket consists of 15 apples and 10 oranges
Refer to Table 24-2. If 2012 is the base year, then the CPI for 2013 was
a. 100.0. b. 110.0. c. 104.4. d. 95.7.
| year | price of apples | price of oranges |
| 2012 | $11 each | $6 each |
| 2013 | $9 each | $10 each |
Solution
CPI inflation is calculated as (current year cost / base year cost) * 100
In the given question current year cost = 9 * 15 + 10 * 10 (cost of consumption bundle in current year)
base year cost = 11 * 15 + 10 * 6 = (cost of consumption bundle according to base year prices)
CPI =( 9*15 + 10*10) / (11*15 + 10*6) * 100
(235/225) * 100 = 940/9 = 104.4.Thus the correct option is option (c)
