In 2007, based upon the Survey of Household Spending of 2005, Statistics Canada

Question

In 2007, based upon the Survey of Household Spending of 2005, Statistics Canada announced the following weights for the major spending categories tracked by the CPI.

Employ the weights given below and suppose that 2002 is the base year with a CPI equal to 100. Suppose also that since 2002 the price of food has increased by 10 percent; the price of housing has increased by 15 percent; and the price of recreation, education, and reading has increased by 20 percent. All other prices are unchanged. Find the CPI for the current year (2012)  

Explanation / Answer

CPI for the current year (2012) = 100*(1+0.1*0.35+0.15*0.2+0.2*0.25)

=111.5

=>
CPI for the current year (2012) =111.5

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