The table below shows the market basket quantities and prices for the base year (year 1)

Base year 1 Price in price
Quantity base year yr 2
Product

Pizza 15 $3 $3.75

t-shirts 4 $10 $9

rent 1 $500 $550

In year 1 the CPI was?
In year 2 the CPI was?

I know that cpi= (expenditures in current yr/ex in base year) X 100

I am having trouble calculating this. So for year 1 would I just multilpy the price by the quantity for year 1??

To calculate the CPI (Consumer Price Index) for a specific year, you need to follow these steps:

Step 1: Calculate the expenditure in the current year.
For year 1, you will multiply the quantity in the base year (year 1) with the price in the current year (year 1) for each product, and then sum up the total expenditures.

Expenditure in year 1 = (Quantity in year 1) × (Price in year 1)

For example:
Expenditure in year 1 for Pizza = 15 (Quantity) × $3 (Price) = $45
Expenditure in year 1 for T-shirts = 4 (Quantity) × $10 (Price) = $40
Expenditure in year 1 for Rent = 1 (Quantity) × $500 (Price) = $500

Total expenditure in year 1 = $45 + $40 + $500 = $585

Step 2: Calculate the expenditure in the base year (year 1).
For year 1, the base year expenditure is simply the total expenditure in year 1.

Expenditure in the base year (year 1) = Total expenditure in year 1 = $585

Step 3: Plug in the values into the CPI formula.
For year 1:
CPI in year 1 = (Expenditure in year 1 / Expenditure in the base year) × 100

CPI in year 1 = ($585 / $585) × 100 = 100

Therefore, the CPI in year 1 is 100.

For year 2, you will follow the same steps:

Step 1: Calculate the expenditure in the current year.
Expenditure in year 2 = (Quantity in year 1) × (Price in year 2)

For example:
Expenditure in year 2 for Pizza = 15 (Quantity) × $3.75 (Price) = $56.25
Expenditure in year 2 for T-shirts = 4 (Quantity) × $9 (Price) = $36
Expenditure in year 2 for Rent = 1 (Quantity) × $550 (Price) = $550

Total expenditure in year 2 = $56.25 + $36 + $550 = $642.25

Step 2: Calculate the expenditure in the base year (year 1).
For year 2, the base year expenditure remains the same as year 1.

Expenditure in the base year (year 1) = Total expenditure in year 1 = $585

Step 3: Plug in the values into the CPI formula.
For year 2:
CPI in year 2 = (Expenditure in year 2 / Expenditure in the base year) × 100

CPI in year 2 = ($642.25 / $585) × 100 ≈ 109.85

Therefore, the CPI in year 2 is approximately 109.85.