Question

The table below pertains to a small agricultural economy where the typical consumer's basket

consists of 10 pounds of apples and 20 pounds of oranges. If 2017 is the base year, then the CPI
for 2018 was?

Year
Price of Apples
Price of Oranges
2017
$2.0 per pound (Apples)
$2.00 per pound (Oranges)
2018
$1.5 per pound (Apples)
$3.00 per pound (Oranges)

A) 125.0
B) 100.0
C) 95.0
D) 110.0

Answer 1

125

Step-by-step explanation:

Given the table:

Year

Price of Apples

Price of Oranges

2017

$2.0 per pound (Apples)

$2.00 per pound (Oranges)

2018

$1.5 per pound (Apples)

$3.00 per pound (Oranges

Consumer price index is obtained using the formular :

CPI = (Cost of market basket In current period / Cost of market basket in base period) * 100

Current period (2018):

Cost of 10 pounds of apple and 20 pounds of oranges :

($1.5 * 10) + ($3 * 20) = $15 + $60 = $75

Base year (2017)

Cost of 10 pounds of apple and 20 pounds of oranges :

($2 * 10) + ($2 * 20) = $20 + $40 = $60

Hence,

CPI = ($75 / $60) * 100

CPI = 1.25 * 100

CPI = 125