Question

The cost of a nation's market basket in the base year is 1,200$, and the current year's price index equals 125 . What is the cost of the market basket in the current year?

Short answer

$\$1500$is the cost of the market basket in the current year.

Step-by-step solution

introduction 

A market basket is a collection of consumer products and services whose prices are used to create a consumer value file and calculate living costs.

explanation

The cost of the market basket in the current year is,

Now,

Price index = $125$and cost of the market in base year = $\$1200$

$$\begin{gathered} \Rightarrow \frac{PriceIndex\times \cos tofmarketinbaseyear}{100} \\ =\frac{125\times 1200}{100}=1500 \end{gathered}$$

Hence the cost of the market basket in the current year is$\$1500$