CPI questions?

Question

In 2000

Price of Automobile = $50,000

# of Autombiles produced = 100

Price of a loaf of bread = $10

# of loaves produced = 500,000

In 2010

Price of Automobile = $60,000

# of Autombiles produced = 120

Price of a loaf of bread = $20

# of loaves produced = 400,000

It asks for the "Weights of automobiles and bread based on year 2000 production." I don't know what it means by weights.

And how do I calculate the CPI for 2010 with 2000 as the base year?

Lastly, the rate of inflation between 2000 and 2010 based on the Laspeyres index?

Answer 1

The question you have posted looks like an assignment which you have been given but you are either very lazy or you don't pay attention in class.

I would edge you to do this by your self bacause it will help deepen your understanding of these economic issues.

But just to help you with a few. Here are some of the hints to follow:

Starting with the third question

          Inflation (%) = [current price - previous price] / previous price * 100

     for bread = [20 - 10] / 10 * 100 = 100%.

The second question

          CPI = [current price / previous price] * 100

     for bread = [20 / 10] * 100 = 0.1

Do the others yourself. Perfect practice makes perfect. For the first question, look at the quontities produced and compare the current and the previous then you will find the weights. Just as in inflation.

If you are still having problems then e-mail me for more assistance.

Don't be lazy!!!!!

Answer 2

P - price

Q - quantity

V - volume = P * Q

W - weight = Vn / (V1+V2)

2010(2000) - values of year 2010 in 2000 prices.

Name\Year.....2000.... 2010........2010(2000)

P1...............50000..... 60000

Q1.................100.......... 120

P2..................10............ 20

Q2............500000..... 400000

V1...........5000000... 7200000.......6000000

V2...........5000000... 8000000.......4000000

V1+V2....10000000. 15200000.....10000000

W1...........0.50........... 0.47..............0.60

W2...........0.50........... 0.53..............0.40

Weights are simple, for instance W1=V1 / (V1+V2)

CPI= (V1+V2) from 2010 divided by (V1+V2) from 2010(2000) and multiplied by 100

CPI= 10000000 / 15200000 = 152

Laspeyres index = ((60000*100) + (20*500000)) / ((50000*100) + (10*500000)) =

=(6000000 + 10000000) / ( 5000000 + 5000000) = 1.6