a. Cost of living. Introduction: Consumer price index (CPI) calculates the weighted average of prices of all the goods and services that are in the consumer’s basket, the consumer basket contains all those goods and services which are consumed by the consumer for satisfaction of his wants. The overall increase in CPI, which is the weighted average of prices of all the goods and services, is known as inflation rate. Formula to calculate inflation rate is: Inflation Rate = Price Index for Current Year − Price Index for Previous Year Price Index for Previous Year × 100 Cost of living refers to the cost which is required to maintain particular level of life style, it can be used to compare the expense of living between various places or cities or countries.

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Chapter 22, Problem 14P

To determine

a.

Cost of living.

Introduction: Consumer price index (CPI) calculates the weighted average of prices of all the goods and services that are in the consumer’s basket, the consumer basket contains all those goods and services which are consumed by the consumer for satisfaction of his wants.

The overall increase in CPI, which is the weighted average of prices of all the goods and services, is known as inflation rate. Formula to calculate inflation rate is:

Inflation Rate=Price Index for Current Year−Price Index for Previous YearPrice Index for Previous Year×100

Cost of living refers to the cost which is required to maintain particular level of life style, it can be used to compare the expense of living between various places or cities or countries.

To determine

b.

Inflation rate.

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