Consumer Price Index

Running head: CONSUMER PRICE INDEX
Consumer Price Index
Name of the Student
Name of the University
Course ID

CONSUMER PRICE INDEX1
Table of Contents
Response to question a...............................................................................................................2
Response to question b...............................................................................................................2
Response to question c...............................................................................................................3
Response to question d...............................................................................................................3
References..................................................................................................................................5

CONSUMER PRICE INDEX2
Response to question a
Consumer price Index (CPI) is the measure of average increase in prices of
commodities included in a particular basket (Khan Academy, 2019). In this case, the
commodity basket includes food, clothing and medical care. Therefore, the average change in
prices of the commodities in the basket will give the CPI in this case. The change in food
prices is given as 4.6 %, change in in clothing prices is given as 4.2 % and change in price of
medical care is given as 3.2%.
Therefore,
CPI= Average change∈the prices of the commodities of thebasket
¿ , CPI= ( 4.6+ 4.2+3.2
3 )%
¿ , CPI=4 %
Response to question b
In the given case, the CPI increased by 3.8%, but the commodity basket that includes
only food, clothing and medical care gives the CPI as 4%. Therefore, if other items are
included in the commodity basket then it will give the CPI as 3.8%, which is lower than 4%.
Therefore, it is clear that the change in other items is less than 3.8%. Hence, there is now four
items in the baskets namely, food, clothing, medical care and other items.
Calculating the percentage change in price of other items,
CPI= 4.6+4.2+ 4.3+Other items
4
¿ , 3.8= 12+Other items
4