In a country, people use only three products (Milk, Apple and Bread) for consumption. A typical basket for the country contains 10 liters of milk, 5 kg of apples and 15 packs of bread. The Price in AED of these products are given in the below table. The base year is given as 2015.Find the consumer price index (CPI) and inflation for all the years?What are the shortcomings of CPI? YearMilk per literApple per KGBread Per packet20151032201610.53.52201711.553201812642019147520201685

Following formulas are used :- CPI for year X = (Cost of basket in year X / Cost of basket in base…

Answered: In a country, people use only three…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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In a country, people use only three products (Milk, Apple and Bread) for consumption. A typical basket for the country contains 10 liters of milk, 5 kg of apples and 15 packs of bread. The Price in AED of these products are given in the below table. The base year is given as 2015.
1. Find the consumer price index (CPI) and inflation for all the years?
2. What are the shortcomings of CPI?


Year	Milk per liter	Apple per KG	Bread Per packet
2015	10	3	2
2016	10.5	3.5	2
2017	11.5	5	3
2018	12	6	4
2019	14	7	5
2020	16	8	5

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