ECON 121 - Short Writing Assignment #4

Assume the market basket for the citizens of a country is: 10 pounds of apples, 20 gallons of gasoline, and 5 t-shirts.

You have the following price data for these three goods over three years:

	Price of Apples	Prices of Gasoline	Price of T-shirts
Year 1	$2.00/lb	$3.00/gallon	$15.00/shirt
Year 2	$2.20/lb	$3.50/gallon	$16.00/shirt
Year 3	$2.50/lb	$4.00/gallon	$18.00/shirt

Using Year 1 as the base year, calculate the CPI for each Year (Year 1, Year2, and Year 3) in the space below:

Based on you answers above, what was the inflation rate from Year 1 to Year 2? From Year 2 to Year 3?