QUESTION 34 Quantity PricePrice Item (Market Basket)(2011 (2012) $60 540 Sne ake

Question

QUESTION 34 Quantity PricePrice Item (Market Basket)(2011 (2012) $60 540 Sne akers Manicures 535 Consumers in a country buy only two goods, sneakers and manicures. The prices and quantities purchased by urban households are in the table above. The reference base year is 2011. For these data, the CPI for 2011 is 110 O 160. O 145. ? 100. QUESTION 35 QuantityPrice Price Item Market Basket )(2011)(2012) Sne ake r Manicures $35 $40 Consumers in a country buy only two goods, sneakers and manicures. The prices and quantities purchased by urban households are in the table above. The reference base year is 2011. For these data, the CPI for 2012 s 10 100 145 110.

Explanation / Answer

1) Cost of the items in 2011 = Q*P

Cost of items in 2011 = 2*55+1*35 = 145

CPI in 2011 =[( cost of item in given year )/(cost of item in base year)]*100

Here base year and given year are equal

CPI in 2011 = (145/145)*100

CPI in 2011 = 100

Answer : 100

2) Cost of item in 2012= 2*60+1*40 = 160

Cost of item in 2011 = 2*55+1*35 = 145

CPI in 2012 = [ (cost of item in 2012)/(cost of item in 2011)]*100

CPI in 2012 = (160/145)*100

CPI in 2012 = 110.3

Answer : 110

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