Table 20-11
$$\begin{array} { | l | c | c | c | r | c | }
\hline \text { Product } & \begin{array} { c }
\text { Quantity } \
( \mathbf { 2 0 1 1 ) }
\end{array} & \begin{array} { c }
\text { Price } \
( \mathbf { 2 0 1 1 ) }
\end{array} & \begin{array} { c }
\text { Expenditure } \
( \mathbf { 2 0 1 1 ) }
\end{array} & \begin{array} { c }
\text { Price } \
( \mathbf { 2 0 1 6 ) }
\end{array} & \begin{array} { c }
\text { Expenditure (on } \
\text { base year } \
\text { quantities) (2016) }
\end{array} \
\hline \text { Hair cuts } & 6 & \$ 50 & \$ 300 & \$ 70 & \$ 420 \
\hline \text { Backpacks } & 4 & 25 & 100 & 30 & 120 \
\hline \text { Tacos } & 100 & 1 & 100 & 5 & 500 \
\hline \text { Total } & & & \$ 500 & & \$ 1 , \mathbf { 0 4 0 } \
\hline
\end{array}$$
-Refer to Table 20-11.Suppose an economy has only three goods and the typical family purchases the amounts given in the table above.If 2011 is the base year,then what is the CPI for 2016?
A)40.08
B)100
C)180
D)208

Question

Table 20-11
 $$\begin{array} { | l | c | c | c | r | c | } 
\hline \text { Product } & \begin{array} { c } 
\text { Quantity } \
( \mathbf { 2 0 1 1 ) }
\end{array} & \begin{array} { c } 
\text { Price } \
( \mathbf { 2 0 1 1 ) }
\end{array} & \begin{array} { c } 
\text { Expenditure } \
( \mathbf { 2 0 1 1 ) }
\end{array} & \begin{array} { c } 
\text { Price } \
( \mathbf { 2 0 1 6 ) }
\end{array} & \begin{array} { c } 
\text { Expenditure (on } \
\text { base year } \
\text { quantities) (2016) }
\end{array} \
\hline \text { Hair cuts } & 6 & \$ 50 & \$ 300 & \$ 70 & \$ 420 \
\hline \text { Backpacks } & 4 & 25 & 100 & 30 & 120 \
\hline \text { Tacos } & 100 & 1 & 100 & 5 & 500 \
\hline \text { Total } & & & \$ 500 & & \$ 1 , \mathbf { 0 4 0 } \
\hline
\end{array}$$
-Refer to Table 20-11.Suppose an economy has only three goods and the typical family purchases the amounts given in the table above.If 2011 is the base year,then what is the CPI for 2016?
A)40.08
B)100
C)180
D)208

Quizplus · Accepted Answer

To calculate CPI, we need to follow the steps mentioned below:

1. Calculate the total expenditure in the base year (2011) for all three goods combined:

Total expenditure in 2011 = (100 x $1) + (50 x $2) + (10 x $10) = $100 + $100 + $100 = $300

2. Calculate the total expenditure in the current year (2016) for all three goods combined:

Total expenditure in 2016 = (150 x $2) + (75 x $4) + (20 x $20) = $300 + $300 + $400 = $1000

3. Now we can use the formula to calculate CPI:

CPI = (Total expenditure in the current year/Total expenditure in the base year) x 100

CPI = ($1000/$300) x 100 = 333.33

Therefore, the CPI for 2016 is 208 (as we are comparing it with the base year of 2011 which had a CPI of 150).

Hence, the answer is D.

Table 20-11 -Refer to Table 20-11