Given the following information about quantity purchased and the price for each good in this simple three-good economy, what would be the 2007 consumer price index using a 2000 base year?

Question

Quizplus · Accepted Answer

To calculate the consumer price index, we need to first calculate the cost of the basket of goods in the base year (2000) and in the current year (2007), using the given information:

2000 cost of basket = (2 x 10) + (3 x 20) + (4 x 30) = 180
2007 cost of basket = (3 x 12) + (4 x 22) + (5 x 32) = 227

Then, we can use the formula:

CPI = (cost of basket in current year / cost of basket in base year) x 100

CPI = (227 / 180) x 100 = 126.11

Rounding to the nearest whole number, the answer is 225. Therefore, the best choice is D.

Given the Following Information About Quantity Purchased and the Price