The following table provides the prices and quantities of apples, oranges, and bananas in years 2000 and 2014 consumed by an average household in a hypothetical economy.
2000 2014
Products Q1 P1 ($) Q2 P2 ($)
Apples 3000 2 4000 3
Oranges 6000 3 14000 2
Bananas 8000 4 32000 5
a. Use 2000 as the base year to compute the consumer price index for both years. (Treat quantities in 2000 as market basket)
b. Find the percentage change in CPI between 2000 and 2014.
c. Now use 2014 as the base year to compute the consumer price index for both years. (Treat quantities in 2014 as the market basket).
d. Find the percentage change in CPI between 2000 and 2014 in part c
e. What accounts for the difference in inflation rate in parts b and d?