how to calculate the cpi for a given market basket, with given year and prices?

To calculate the Consumer Price Index (CPI) for a given market basket with given year and prices, you need to follow these steps:

1. Define the market basket: Start by determining the goods and services that comprise the market basket for which you want to calculate the CPI. The market basket typically includes items that are representative of the average consumer's spending patterns.

2. Gather price data: Collect the price data for each item in the market basket for the base year (the year for which you want to establish a benchmark) and the current year. Ensure that the prices are consistently measured (e.g., the same quantity or package size) and obtained from reliable sources such as government reports, market surveys, or official statistics.

3. Calculate the cost of the market basket: Multiply each item's price in the current year by its quantity in the base year to determine the cost of the market basket for the base year. Similarly, multiply each item's price in the current year by its quantity in the current year to determine the cost of the market basket for the current year.

4. Calculate the CPI: Divide the cost of the market basket in the current year by the cost of the market basket in the base year. Then multiply the result by 100 to express the CPI as an index number.

CPI = (Cost of Market Basket in Current Year / Cost of Market Basket in Base Year) x 100

The resulting CPI number represents the percentage change in the average price level of the market basket from the base year to the current year. It provides a measure of inflation or deflation over time and allows for comparisons of purchasing power between periods.