Answer to Question #112870 in Economics for JENNIE

Question

In calculating a retail price index, all goods and services are placed in one of the three categories in the table below.

Item Weight Current prices (base year = 100)
Food 5 110
Clothing 3 120
Other goods 2 130

What has been the percentage increase in the price index since the base year?
A) 17%
B) 20%
C) 117%
D) 120%

Answer 1

Retail price index is:

$RPI = \frac{5×110 + 3×120 + 2×130} {5 + 3 + 2} = 117$ %, so the correct answer is C.