If the cost of food & beverages increases by 10 percent,then,other things the same,the CPI is likely to increase by about
A)1.5 percent.
B)7.5 percent.
C)10 percent.
D)20 percent.

Question

Quizplus · Accepted Answer

The cost of food & beverages is only one component of the CPI (Consumer Price Index) basket. Therefore, a 10 percent increase in the cost of food & beverages alone cannot lead to a 10 percent increase in the CPI. The weight of food & beverages in the overall basket is around 15 percent, on average. Therefore, a 10 percent increase in the cost of food & beverages would lead to a 1.5 percent increase in CPI (10 percent x 15 percent).

If the Cost of Food & Beverages Increases by 10