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Consumer Price Index

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Muhammad Mustansir
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18 views3 pages

Consumer Price Index

C0i

Uploaded by

Muhammad Mustansir
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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Consumer Price Index

Use the information in this table to answer the questions that follow.

Price Per Year 1 Year 1 Year 2 Year 2 Year 3 Year 3


Pound Quantity Price Quantity Price Quantity Price Quantity
in Pounds
Tomatoes 2.75 52 3.00 60 3.25 56
Watermelon 0.40 90 0.44 100 0.42 100
Peanuts 4.00 87 4.10 100 4.25 92

1. Fill in the table below using Year 1 as the base year.


Cost of Market Basket Price Index Value
Year 1
Year 2
Year 3

2. Using the table you constructed, calculate the rate of inflation between Year 1 and Year 2.

3. Using the table you constructed, calculate the rate of inflation between Year 2 and Year 3.

Fill in the table below using Year 2 as the base year.


Cost of Market Basket Price Index Value
Year 1
Year 2
Year 3

4. Using the table you constructed, calculate the rate of inflation between Year 1 and Year 2.

5. Using the table you constructed, calculate the rate of inflation between Year 2 and Year 3.

6. How does the information when using Year 1 as the base year compare to the information
when using Year 2 as the base year?
Consumer Price Index Answer Key
Use the information in the table above to answer the following questions.

Price Per Year 1 Year 1 Year 2 Year 2 Year 3 Year 3


Pound Quantity Price Quantity Price Quantity Price Quantity
in Pounds
Tomatoes 2.75 52 3.00 60 3.25 56
Watermelon 0.40 90 0.44 100 0.42 100
Peanuts 4.00 87 4.10 100 4.25 92

1. Fill in the table below using Year 1 as the base year.


Cost of Market Basket Price Index Value
(2.75 x 52) + (0.40 x 90) + (4.00 x 87)
Year 1 (527 / 527) × 100 = 100
= 143 + 36 + 348 = 527
(3.00 x 60) + (0.44 x 100) + (4.10 x
Year 2 (634 / 527) × 100 = 120.3
100) = 180 + 44 + 410 = 634
(3.25 x 56) + (0.42 x 100) + (4.25 x 92)
Year 3 (615 / 527) × 100 = 116.7
= 182 + 42 + 391 = 615

2. Using the table you constructed, calculate the rate of inflation between Year 1 and Year
2.

(120.3 – 100) / 100 × 100 = .203 x 100 = 20.3% increase in inflation

3. Using the table you constructed, calculate the rate of inflation between Year 2and Year 3.

(116.7 – 120.3) / 120.3 × 100 = -0.03 x 100 = 3% decrease in inflation

4. Fill in the table below using 2013 as the base year.


Cost of Market Basket Price Index Value
(2.75 x 52) + (0.40 x 90) + (4.00 x
Year 1 (527 / 634) × 100 = 83.1
87) = 143 + 36 + 348 = 527
(3.00 x 60) + (0.44 x 100) + (4.10 x
Year 2 (634 / 634) × 100 = 100
100) = 180 + 44 + 410 = 634
(3.25 x 56) + (0.42 x 100) + (4.25 x
Year 3 (615 / 634) × 100 = 97
92) = 182 + 42 + 391 = 615

5. Using the table you constructed, calculate the rate of inflation between Year 1 and Year
2.

(100 – 83.1) / 83.1 = .203 × 100 = 20.3% increase in inflation

6. Using the table you constructed, calculate the rate of inflation between Year 2 and Year
3.
(97 – 100) / 100 = -0.03 × 100 = 3% decrease in inflation

7. How does the rate of inflation when using 2012 as the base year compare to the
rate of inflation when using 2013 as the base year?

It doesn’t matter which base year we choose, the rate of inflation stays the same
even though the price index is different for each base year.

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