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Calculating CPI Practice
Answer the following questions.
- Scenario: Your market basket contains 4 fish and 3 chips. In 2018, the price of fish was $3 and chips cost $2. Calculate: What is the cost of the same market basket in 2018?
Answer: Cost = $18
How to Solve: Determine the cost for the quantity of each item and then add.
a. Number of fish × Cost of fish = Total cost of fish = 4 × $3 = $12
b. Number of chips × Cost of chips = Total cost of chips = 3 × $2 = $6
c. $12 (fish) + $6 (chips) = $18
- Scenario: Your market basket contains 4 fish and 3 chips. In 2018, the price of fish was $3 and chips cost $2. Calculate: If your market basket costs $18 dollars in 2018 and 2018 is the base year, what is the CPI for the base year?
Answer: CPI for the base year = 100
How to Solve: To determine the CPI, divide the market basket cost for the given year by the market basket cost for the base year and multiple by 100.
($18 / $18) × 100 = 1 × 100 = 100
The base year CPI is always 100.
- Scenario: Your market basket contains 4 fish and 3 chips. In 2018, the price of fish was $3 and chips cost $2. Calculate: Assume the market basket in 2018 costs $18 and 2018 is the base year. What is the CPI for 2019 if the basket costs $24?
Answer: CPI for 2019 = 133.3
How to Solve: To determine the CPI, divide the market basket cost for the given year by the market basket cost for the base year and multiply by 100.
($24 / $18) × 100 = 1.333 × 100 = 133.3
- Scenario: Your market basket contains 4 fish and 3 chips. In 2018, the price of fish was $3 and chips cost $2. Calculate: Assume that the market basket for 2018 is $18 and the market basket for 2019 is $24. If the base year is 2019, what is the CPI for 2018?
Answer: CPI for 2018 = 75
How to Solve: To determine the CPI, divide the market basket cost for the given year by the market basket cost for the base year and multiply by 100.
($18 / $24) × 100 = 0.75 × 100 = 75
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