Question

In 2016, the cost of a market basket of goods was \(2,000. In 2018, the cost of the same market basket of goods was \)2,100. Use the price index formula to calculate the price index for 2018 if 2016 is the base year.

Short answer

The price index for$2018$is$105$.

Step-by-step solution

introduction

The price index estimates the general change in the price of a market container of labour and products throughout some undefined time frame.

explanation

The price index is calculated as,

$$\begin{gathered} =\frac{\text{cost of market basket in}2018}{\text{cost of market basket in}2016}\times 100 \\ =\frac{2100}{2000}\times 100 \\ =105 \end{gathered}$$