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April 16, 2014

April 16, 2014

Posted by **shelby** on Tuesday, September 26, 2006 at 8:50am.

As this is your third post....

First calculate the "weight" of each good. Total spending in the base year is cauliflower=200, broccoli=75, carrots=50, total=325. So, the weight for cauliflower is 200/325=.61538 Calculate the weights for broccoli and carrots.

Next, calculate prices in the base year and next year. In 1998 100 heads of cauliflower were purchased for $200. So, the price per head is $2. The price per head in 1999 is 225/75=$3. Calculate the prices for broccoli and carrots.

Now calculate the percentage change in prices. Cauliflower went from $2 to $3, a 50% increase. Multiply this by the cauliflower weight. I get .30769. Do the same for broccoli and carrots. Add up the weighted changes of the three goods. This is the overall weighted average increase in prices. I get .462

In CPI-speak, the base year is always 100.0 So, the CPI for 1999 is 146.2

Thank you so much for all your help!!!!!!!! :)

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