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    Calculation of Consumer Price Index

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    Calculate a new consumer price index for the data in the following exhibit. Assume that current-year prices of Twinkies, fuel oil, and cable TV are $0.95/package, $1.25/gallon, and $15.00/month, respectively. Calculate the current year's cost on the market basket and the value of the current year's price index. What is the year's percentage change in the price level compared to the base year?

    See attached table.

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    Solution Preview

    The consumer price index (CPI) is the ratio of the value of a market basket of goods in a particular (current) year divided by the market value of the same basket of goods during the base year. This ratio is multiplied by 100 to ...

    Solution Summary

    The Solution uses the consumer price index to find the percentage change in price level for three different products.