Final answer:
The inflation rate from 2013 to 2014 on Orca Island, with 2013 as the base year, is calculated by comparing the CPI of both years. After finding the total cost of a fixed basket of goods for each year and computing the CPI, the inflation rate is determined to be -5.60%, indicating a period of deflation.
Step-by-step explanation:
To calculate the inflation rate from 2013 to 2014 based on the Consumer Price Index (CPI), using 2013 as the base year, we first need to compute the CPI for both years. We do this by taking the cost of a fixed basket of goods in each year and then comparing these costs.
To find the total cost of the basket in each year, multiply the prices of goods by their quantities in that year. For 2013: (Fish Sandwiches: 7.00 \* 800) + (Snow Cones: 4.00 \* 1500), for 2014: (Fish Sandwiches: 8.00 \* 750) + (Snow Cones: 4.50 \* 1100).
Step-by-Step Calculation
- Calculate total cost of the basket for 2013: (7 \* 800) + (4 \* 1500) = 5600 + 6000 = 11600.
- Calculate total cost of the basket for 2014: (8 \* 750) + (4.50 \* 1100) = 6000 + 4950 = 10950.
- Calculate CPI for each year by taking the total cost for the respective year and dividing it by the total cost of the base year (2013) \* 100. CPI for 2013 = (11600 / 11600) \* 100 = 100. CPI for 2014 = (10950 / 11600) \* 100 = 94.40.
- Calculate the inflation rate by taking the difference in CPI between the two years and dividing by the CPI for the base year. Inflation Rate = [(CPI in 2014 - CPI in 2013) / CPI in 2013] \* 100 = [(94.40 - 100) / 100] \* 100 = -5.60%.
Therefore, the inflation rate from 2013 to 2014 is -5.60%. This negative rate indicates that there was actually deflation rather than inflation, as the average cost of the basket of goods has decreased.