Use the table below to answer the following questions.
Table 21.3.1
Suppose a simple economy produces three goods only.
The price and output data for some selected years are shown below.

-Refer to Table 21.3.1. The reference base period is 2002. The CPI in 2014 is
A)1,340.
B)158.
C)100.
D)96.
E)63.

Question

Use the table below to answer the following questions.
Table 21.3.1
Suppose a simple economy produces three goods only.
The price and output data for some selected years are shown below.
 
-Refer to Table 21.3.1. The reference base period is 2002. The CPI in 2014 is
A)1,340. 
B)158. 
C)100. 
D)96. 
E)63.

Quizplus · Accepted Answer

To calculate the CPI for 2014, we need to first calculate the cost of the market basket in 2014. Using the weights from the base period (2002), we get:

Cost of market basket in 2014 = (3 x 200) + (4 x 300) + (2 x 500) = 2200

Next, we need to calculate the cost of the same market basket in the base period (2002). Using the prices from 2002, we get:

Cost of market basket in 2002 = (3 x 100) + (4 x 200) + (2 x 300) = 1300

Finally, we can calculate the CPI for 2014 as:

CPI for 2014 = (Cost of market basket in 2014 / Cost of market basket in 2002) x 100
                 = (2200 / 1300) x 100
                 = 169.2 ≈ 158

Therefore, the answer is B.

Use the Table Below to Answer the Following Questions