(4.1) Calculate a new consumer price index for the data in the following exhibit
ID: 1250614 • Letter: #
Question
(4.1) Calculate a new consumer price index for the data in the following exhibit. Assume that current-year prices of twinkies, fuel oil and cable tv are $0.95/package, $1.25/gallon, and $15.00/month, respectively. Calculate the current year's cost of the market basket and the value of the current year's price index. What is this year's percentage change in the price level compared to the base year?A. Product-Twinkies, Quality in market basket=365 packages, Prices in base year $.89/package, cost of basket in base year (3) = (1) x (2) = $324.85, Prices in current year=$0.79, Cost of basket in current year (5) = (1) x (4) $288.35
B. Product-Fuel oil, Quality in market basket=500 Gallons, Prices in base year $.1.00/Gallon, cost of basket in base year (3) = (1) x (2) = $500.00, Prices in current year=$1.50, Cost of basket in current year (5) = (1) x (4) $750.00
C. A. Product-Cable TV, Quality in market basket=12 Months, Prices in base year $30.00/Month, cost of basket in base year (3) = (1) x (2) = $360.00, Prices in current year=$30.00, Cost of basket in current year (5) = (1) x (4) $360.00
Explanation / Answer
The current year's cost of the basket is: 365*0.95+500*1.25+12*15 = $1,151.75 Base year's basket costs: 365*0.89+500*1+12*30 = $1,184.85 The CPI for the current year is: 1151.75*100/1184.85 = 97.21 The change in price compared to the base year is 1151.75/1184.85 -1 = -2.79%
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