Commodity Market Basket Quantity 2001 price 2002 price lbs. $ $ lbs. $ $ Assuming that 2001 is the base year, calculate the price index for 2002. In 2002, the price index is nothing. (Round your answer to two decimal places.) The inflation rate between 2001 and 2002 is nothing%. (Round your answer to two decimal places.)

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codiepienagoya codiepienagoya · Answer 1 · 2020-10-23T08:14:10+02:00

Answer:

The answer is "Its price index for 2002 was = 113.66, and From 2001 to 2002, inflation was = 13.66".

Explanation:

please find the complete question in the attached file.

2001 business basket:

[tex]= (30 \ lbs \times \$ 3.00)+ (25 lbs \times \$ 3.50)\\\\ = \$ 90.00 + \$ 87.5 \\\\ = $177.5[/tex]

2002 business basket:

[tex]= (30 \lbs \times \$ 3.60)+ (25 \lbs \times \$ 3.75) \\\\ = \$ 108 + \$ 93.75 \\\\ = \$ 201 .75[/tex]

[tex]\text{Price index 2002} = (\frac{2002 \ market \ basket }{ 2001 \ market \ basket}) \times 100[/tex]

[tex]= ( \frac{\$ 201.75}{\$177.50} ) \times 100\\\\= 1.1366 \times100\\\\ = 113.66[/tex]

[tex]\to Inflation = [\frac{(CPI year-CPI base year)}{CPI base year}] \times 100[/tex]

[tex]= [ \frac{(113.66 - 100 )}{100} ] \times 100\\\\= 0.1366 \times 100 \\\\ = 13.66[/tex]