# Economics

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Suppose that the residents of Vegopia spend all of their income on cauliflower, broccoli, and carrots. In 2006 they buy 100 heads of cauliflower for \$200, 50 bunches of broccoli for \$75, and 500 carrots for \$50. In 2007, they buy 75 heads of cauliflower for \$225,80 bunches of broccoli for \$120, and 500 carrots for \$100.

b) Using 2006 as the base year calculate the CPI for each year.
c) What is the inflation rate in 2007?

b)CPI of 2006= [(\$325/\$325)x 100] = 100
CPI of 2007= [(\$425/\$325) x 100] = 137

c) Inflation rate in 2007 = [(137-100)/100 x 100] = 37%
Inflation rate in 2007 is 37%.

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