Thus, the cost of the market basket in 2011 = (P of\'x\' in a year x Q of V in b

Question

Thus, the cost of the market basket in 2011 = (P of'x' in a year x Q of V in base year) + (P of'y' in a year times Q of 'y' in base year) + (P of 'z' in a year times Q of 'z' in base year) = $1.00 times 150 + $1.50 times 175 + $3.00 times 50 = $ 562.5 (Enter your response rounded to two decimal places.) Similarly, the cost of the market basket in 2012 = (P of 'x' in a year x Q of 'x' in base year) + (P of y in a year times Q of y in base year) + (P of 'z' in a year times Q of 'z' in base year) = $1.50 times 150 + $1.95 times 175 + $3.24 times 50 = $ 728.25 (Enter your response rounded to two decimal places.) And, the cost of the market basket in 2013 = (P of 'x' in a year x Q of 'x' in base year) + (P of 'y' in a year times Q of 'y' in base year) + (P of 'z' in a year times Q of 'z' in base year) = $ 1.90 times 150 + $2.10 times 175 + $3.00 times 50 = $ 802.5 (Enter your response rounded to two decimal places.) The consumer price index (CPI) is a fixed-weight index. It compares the price of a fixed bundle of goods in one year with the price of the same bundle of goods in some base year. Suppose the market basket to compute the consumer price index consists of 150 units of good x, 175 units of good y and 50 units of good z. Year 2011 is used as the base year. Prices of these goods for the years 2011, 2012 and 2013 are given below. Using the above information we can calculate the following: In any given year, the cost of the market basket is the cost of buying the amounts of the items included in the market market using that year's prices. Thus, the cost of the market basket in 2011 = (P of V in a year times Q of 'x' in base year) + (P of 'y' in a year times Q of 'y' in base year) + (P of 'z' in a year times Q of 'z' in base year) = $1.00 times 150 + $1.50 times 175 + $3.00 times 50 = $ 562.5 (Enter your response rounded to two decimal places.) Similarly, the cost of the market basket in 2012 = (P of 'x' in a year times Q of. Y in base year) + (P of 'y' in a year times Q of 'y' in base year) + (P of 'z' in a year times Q of 'z' in base year) $1.50 times 150 + $1.95 times 175 + $3.24 times 50 = $ 728.25 (Enter your response rounded to two decimal places.)

Explanation / Answer

CPI for multiple items = (cost of CPI market basket at current period price / cost of CPI market basket at base period price) *100

CPI for 2011 is [(150 * $1 + 175 * $1.50 + 50 * $3) / 150 * $1 + 175 * $1.50 + 50 * $3)] * 100 = 100

CPI for 2012 is  [(150 * $1.50 + 175 * $1.95 + 50 * $3.24/ 150 * $1 + 175 * $1.50 + 50 * $3)] * 100 = 129.47

CPI for 2013 is  [(150 * $1.90 + 175 * $2.10 + 50 * $3.24/ 150 * $1 + 175 * $1.50 + 50 * $3)] * 100 = 142.67

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