Question

In Bovania, cattle compose 48 percent of the consumer price index (CPI), housing composes 32 percent, and entertainment accounts for the remaining 20 percent. If, in a certain year, the price of cattle rises by 30 percent and the price of housing rises by 25 percent, then:___________

Answer 1

Answer:

no matter what happens to the price of entertainment, the CPI will still increase.

Explanation:

Imagine that year 1 is the base year and the CPI is 100.

Year 2's CPI = (48 x 130%) + (32 x 125%) + $0 entertainment cost = 62.4 + 40 = 102.4

The price of cattle and housing has increased so much, that even if entertainment expenses simply disappear, the CPI will have increased by 2.4%