$$\begin{array} { | l | c | c | c | }
\hline & \begin{array} { c }
\text { CPI basket } \
\text { quantity }
\end{array} & 2003 \text { price } & 2011 \text { price } \
\hline \text { DVDs } & 10 \text { discs } & \$ 16 \text { per disc } & \$ 12 \text { per disc } \
\hline \text { Bottled } & 200 \text { bottles } & \begin{array} { c }
\$ 1.00 \text { per } \
\text { bottle }
\end{array} & \begin{array} { c }
\$ 1.25 \text { per } \
\text { bottle }
\end{array} \
\begin{array} { l }
\text { water }
\end{array} & \text { boter } \
\hline
\end{array}$$
-If 2003 is the reference base period,what is the price index for the CPI basket of goods for 2011 in the above table?

Question

$$\begin{array} { | l | c | c | c | } 
\hline & \begin{array} { c } 
\text { CPI basket } \
\text { quantity }
\end{array} & 2003 \text { price } & 2011 \text { price } \
\hline \text { DVDs } & 10 \text { discs } & \$ 16 \text { per disc } & \$ 12 \text { per disc } \
\hline \text { Bottled } & 200 \text { bottles } & \begin{array} { c } 
\$ 1.00 \text { per } \
\text { bottle }
\end{array} & \begin{array} { c } 
\$ 1.25 \text { per } \
\text { bottle }
\end{array} \
 \begin{array} { l } 
\text { water }
\end{array} & \text { boter } \
\hline
\end{array}$$
-If 2003 is the reference base period,what is the price index for the CPI basket of goods for 2011 in the above table?

Quizplus · Accepted Answer

The price index for the CPI basket of goods for 2011 is calculated as the weighted average of the price relatives for each good, where the weights are the quantities of each good in the basket. The price relative for each good is calculated as the ratio of the price of the good in 2011 to the price of the good in 2003.For DVDs, the price relative is 12/16 = 0.75. For bottled water, the price relative is 1.25/1.00 = 1.25. The weighted average of these price relatives is (10 * 0.75 + 200 * 1.25) / (10 + 200) = 1.25. Therefore, the price index for the CPI basket of goods for 2011 is 1.25 * 100 = 125.

-If 2003 Is the Reference Base Period,what Is the Price