ECO102: Introduction to Macroeconomics
Calculation of Consumer Price Index (CPI)
Required:
i) From the above table-1, calculate the CPI for Year-1 and Year-2.
ii) What is the rate of inflation between Year-1 and Year-2 as measured by the
changes in the CPI?
𝟐𝟖𝟎.𝟖𝟎 ) ×𝟏𝟎𝟎 = 7.50 %.
Table-1
Price Index for Each Category
Category
Weight
Year-1
Year-2
Food & Beverages
0.175
270
270
Housing
0.46
300
330
Apparel
0.046
180
180
Transportation
0.193
280
308
Medical care
0.049
300
330
Entertainment
0.036
230
241
Others
0.041
250
250
1
Table-2: Calculation of CPI
Category
Year-1
0.175(270)
0.175(270)
0.046(180)
0.046(180)
0.193(280)
0.193(308)
0.049(300)
0.049(330)
Entertainment
0.036(230)
0.036(241)
0.041(250)