Question

In: Economics

The monthly market basket for consumers consists of​ pizza, t-shirts, and rent.   The table below shows...

The monthly market basket for consumers consists of​ pizza, t-shirts, and rent.  

The table below shows market basket quantities and prices for the base year​ (Year 1) and in the following two years.

Product

Base Year​ (Year 1)

Quantity

Price in the

Base Year

Price in

Year 2

Price in

Year 3

Pizza

10

​$3.00

​$3.75

​$4.05

​T-Shirts

4

​$25.00

​$22.50

​$26.25

Rent

1

​$400.00

​$440.00

​$520.00

The inflation rate between Year 1 and Year 2 is

nothing​%.

​ (Round

both answers to one decimal

place.​)

The inflation rate between Year 2 and Year 3 is

nothing​%.

Solutions

Expert Solution

Inflation rate between year 1 and year 2 is 7.08 %

Inflation rate between year 2 and year 3 is 9.52%

where,

CPI = Cost of basket in year 2 / Year 1 * 100

inflation rate = CPI in year 2 / CPI in year 1 - 1 * 100

Year CPI Inflation rate
1 100 -
2 107.08 7.08
3 117.27 9.52

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