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A Consumer Expenditure Survey in the city of Firestorm shows that people buy only firecrackers and bandages.
A Consumer Expenditure Survey in 2019 shows that the average household spent $117 on firecrackers and $10 on bandages.
In 2019, the reference base year, the price of a firecracker was $3, and the price of bandages was $1 a pack.
In the current year, 2020, firecrackers are $4 each and bandages are $2 a pack.
Calculate the CPI market basket and the percentage of a household's budget spent on firecrackers in the base year.

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ogorwyne

The CPI market basket in the base year is 39 firecrackers and 10 bandages. The percentage of the amount of firecrackers is 92.12%

Base Year is 2019

In 2019 Average spending on firecracker = $117

Price per 1 = $3

The total number of firecracker in this base year:

[tex]\frac{117}{3}[/tex] = 39 firecrackers

In the same year the amount spent on bandages = $10

price per 1 = $1

The total number bought = 10/1

= 10 bandages

The CPI market basket in the base year is 39 firecrackers and 10 bandages.

Total expenses in the base year  = 117 + 10 = 127 dollars

The percentage of the amount of firecrackers:

[tex]\frac{117}{127}[/tex] = 0.9212

= 92.12%

The percentage of the amount of firecrackers is 92.12%

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