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An economy produces two goods, bread and wheat. A representative consumer buys 10 units of bread and 50 kg of wheat in a year. In the year 2023 the price of per bread was Rs 20 and wheat per kg was Rs 40. Suppose the price of both goods has gone up to Rs. 30 per bread and Rs. 50/kg wheat in the year 2024. Calculate the Consumer Price Index (CPI).

Solution

✅ Correct Option: 2

CPI =cost of base year basket at current pricescost at base year prices×100= \frac{\text{cost of base year basket at current prices}}{\text{cost at base year prices}} \times 100. Cost in 2024 =10×30+50×50=2800= 10 \times 30 + 50 \times 50 = 2800. Cost in 2023 =10×20+50×40=2200= 10 \times 20 + 50 \times 40 = 2200. CPI =28002200×100=127.27= \frac{2800}{2200} \times 100 = 127.27.

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