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To construct the Consumer Price Index (CPI), the government assumes that a representative household consumes 2 units of X, 3 units of Y and 1
To construct the Consumer Price Index (CPI), the government assumes that a representative household consumes 2 units of X, 3 units of Y and 1 unit of Z. Using 2020 as the base year, measure the CPI for 2021 and 2022, and also the inflation rate in 2022. If you randomly select a household and analyse the cost of living of this household from 2020 to 2022, do you expect the changes in the cost of living of this household to be the same as shown in the CPI? Explain
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