The people on Coral Island buy only juice and cloth. The CPI basket contains the quantities bought in 2013. The average household spent
54 on cloth in 2013 when the price of juice was
9 a yard. In 2014, juice is
6 a yard. Calculate the CPI basket and the percentage of the household’s budget spent on juice in 2013. The CPI basket is and The percentage of the household’s budget spent on juice in 2013 is >>> Answer to 1 decimal place. percent.
The Correct Answer and Explanation is:
To solve this question, we need to determine:
- The CPI basket — the quantities of juice and cloth purchased in 2013.
- The percentage of the household’s budget spent on juice in 2013.
Given:
- Households spent $54 on cloth in 2013.
- In 2013, the price of juice was $9 per yard.
- In 2014, the price of juice is $6 per yard.
But we are only focusing on 2013 data to find the CPI basket, which contains the quantities bought in 2013.
Let’s assume:
- In 2013, the household bought x yards of juice.
- The price of juice in 2013 is $9 per yard, so the total spending on juice = 9 × x.
- Spending on cloth in 2013 is already given as $54.
To find the CPI basket, we need both quantities (juice and cloth).
We are not told how much was spent in total or how many units of juice were bought. But since we want to calculate the percentage spent on juice, we will assume the total spending in 2013 = juice spending + cloth spending.
Let’s assume the household bought 1 yard of juice in 2013. Then:
- Juice spending = 1 × 9 = $9
- Cloth spending = $54
- Total spending = 9 + 54 = $63
CPI Basket:
- 1 yard of juice
- Cloth worth $54
We need the quantity of cloth. But we are not given the price of cloth in 2013, so we cannot find the cloth quantity.
Hence, the CPI basket is in spending terms:
CPI basket = $9 worth of juice and $54 worth of cloth
Percentage of Budget Spent on Juice in 2013:
Percentage=(Juice SpendingTotal Spending)×100=(963)×100≈14.3%\text{Percentage} = \left( \frac{\text{Juice Spending}}{\text{Total Spending}} \right) \times 100 = \left( \frac{9}{63} \right) \times 100 \approx 14.3\%Percentage=(Total SpendingJuice Spending)×100=(639)×100≈14.3%
Final Answer:
- CPI basket: $9 on juice and $54 on cloth
- Percentage of household’s budget spent on juice in 2013: 14.3 percent
Explanation:
The Consumer Price Index (CPI) basket reflects the combination of goods and services a typical household buys in a base year — here, 2013. Since we’re told that $54 was spent on cloth and the price of juice was $9 per yard, we can estimate juice purchases by assuming a quantity, such as 1 yard, which leads to $9 in spending. The total budget becomes $63. The proportion of that total spent on juice (9 out of 63) gives approximately 14.3 percent. This ratio shows how much of the household’s expenses went to juice in 2013, a key component for CPI calculations.
