Question

The prices of consumer goods do not always exactly follow the CPI. The following chart shows several consumer items, along with their respective prices in 1983 and today.

Item
Price in 1983 ($)
Current Price ($)
Pair of boots
67.45
126.85
Hair dryer
15.25
29.95
Box of tissues
1.15
2.25
Toaster
22.85
44.25

Using the prices shown on this chart, which of the following is a reasonable estimate of the current CPI?
a.
208
b.
195
c.
180
d.
173


Please select the best answer from the choices provided

A
B
C
D
Mark this and return

Answer 1

Assume the CPI was 100 in 1983 and estimate today’s CPI by averaging the price-ratios:

Boots: 126.85/67.45 ≈ 1.881
Hair dryer: 29.95/15.25 ≈ 1.964
Tissues: 2.25/1.15 ≈ 1.957
Toaster: 44.25/22.85 ≈ 1.937

Average ratio ≈ (1.881+1.964+1.957+1.937)/4 ≈ 1.934 → CPI ≈ 1.934 × 100 ≈ 193.4

Closest choice: 195 (B).