18. Explain how the CPI is computed.
Added by Spencer M.
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It's a weighted average, meaning that items are included based on their relative importance in the average consumer's spending. Show more…
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The following table shows a hypothetical situation for an economy that uses for an average household of four people a basket of only three products to calculate the consumer price index (CPI) between the years 2015 and 2018. Product | 2015 Quantity | 2015 Price | 2016 Q | 2016 P | 2017 Q | 2017 P | 2018 Q | 2018 P Product A | 20 | $50 | 22 | $52 | 23 | $55 | 22 | $56 Product B | 50 | $100 | 55 | $105 | 61 | $111 | 62 | $113 Product C | 4 | $1,200 | 5 | $1,210 | 5 | $1,225 | 5 | $1,230 If the base year is 2015, what is the value of the consumer price index in 2015? (round to the closest integer)
Rashmi S.
a) Calculate the CPI for each year. Show your work in the chart and circle the CPI for each year. b) Calculate the inflation rate for each year compared to the year prior. Show your work in the chart and circle the inflation rate for each year. c) Based on your completed chart, how much less or more were prices in 2015 compared to 2013? Explain. d) If the CPI was 88 in 2012, what was the value of the market basket in 2012? Show your work. e) Based on your answer to part d, what was the inflation rate from 2012 to 2013? Show your work. f) Explain why an economist might favor either the CPI or the inflation rate as an economic indicator.
Azat N.
what is the formula to calculate CPI?
James K.
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