Answer to Question #100517 in Financial Math for Kirstyn

Question

If a basket of goods and services used to calculate CPI contains 2 pairs of socks at $2 each and 1 pair of shoes at $50, what will the CPI for year 2 be if the 2 pairs of socks cost $2.05 and 1 pair of shoes cost $51?

Answer 1

If the 2 pairs of socks cost $2.05 and 1 pair of shoes cost $51, then the CPI for year 2 is:

CPI2 = (2×2.05 + 1×51)/(2×2 + 1×50)×100 = 102.