Answered: Year Price of Food Quantity of Food…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Question

As a first step in computing the consumer price index (CPI), a survey of consumers is done to determine the “basket of goods” purchased by a typical consumer. Suppose that 2009 is given as the base year and, consistent with the data shown in the table above, it was decided that the basket of goods in this economy should consist of one unit of food and two units of clothing.

I. Using 2009 as the base year,what is the CPI in each year: 2009, 2010, and 2011?

ii. What is the inflation rate in 2010 and 2011?

Quantity of Food Price of Clothing Quantity of
Clothing
Year
Price of Food
2009 (base year) $2
1
$1
2
2010
$4
$4
S2
2
2011
$2

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