Question

Compute the consumer price index for 1990 taking 1989 as the base year.

Commodity	Price in 1989	Price in 1990
Butter	20	21
Cheese	16	12
Milk	3	3
Eggs	2.80	2.80

• A. 93
• B. 94
• C. 95
• D. 96

Answer 1

The correct option is A 93

$Commodity$	$Pricein1989$ $P_0$	$Pricein1990$ $P_1$
$Butter$	$20$	$21$
$Cheese$	$16$	$12$
$Milk$	$3$	$3$
$Eggs$	$2.80$	$2.80$
$Total$	$\sum P_0=41.8$	$\sum P_1=38.8$

$\therefore$ By using simple aggregate method,

$\Rightarrow$ $P_{01}=\frac{\sum P_1}{\sum P_0}\times 100=\frac{38.8}{41.8}\times 100=92.82\approx 93$