Calculation of CPI and Inflation with Hypothetical Data The people on Coral Isla

Question

Calculation of CPI and Inflation with Hypothetical Data The people on Coral Island buy only juice and cloth. The CPl basket contains the quantities bought in 2010. The average household spent $34 on juice and $24 on cloth in 2010 when the price of juice was $2 a bottle and the price of cloth was $8 a yare In the current year, 2011, juice is $3 a bottle and cloth is $6 a yard. CPI in 2011 wasRound up your answer to a full number. The inflation rate in 2011 was-_percent. Round up your answer to a full numb , 130:30 120; 12 19: 19 19:1.9

Explanation / Answer

Answer
CPI in 2010 is 100 because it is base year
CPI in 2011=(Price of basket in 2011 prices/price of basket in 2010 prices)*100
price of the basket in 2010 =34+24=58
the quantity of Juice=34/2=17 and quantity of Cloth=24/8=3
Price of basket in 2011=17*3+6*3
=51+18=69
CPI=(69/58)*100
=118.965517=119
Inflation=(CPI of 2011-CPI of 2010)/CPI of 2010
=(119-100)/100=19%
option third

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