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AP Macro Topic 2.4 Price Indices and Inflation Part 1: Practice- In country Davidonia, there are only three goods produced: eggs, bread, and milk. The table includes the prices and quantities purchased of these goods in 2019, 2020, and 2021. Assume that 2019 is the base year. Market Basket Items 2019 Quantity 2019 Price 2020 Quantity 2020 Price 2021 Quantity 2021 Price Eggs 5 dozen $1 10 dozen $2 15 dozen $2 Bread 10 loaves $1 15 loaves $1 15 loaves $2 Milk 20 gallons $3 25 gallons $4 30 gallons $3 1. Calculate the cost of a market basket in the base year. Show your work. $5, add up the prices for all 3 products. 2. Explain why CPI is calculated using the same quantities as the base year instead of different quantities each year? You’re looking for the change in price, not output! It would also not be a fair comparison if the quantities AND the price differ. 3. Calculate the CPI for 2019. Show your work. 100% (75/75)*100 4. Calculate the CPI for 2020. Show your work. 133% (100/75)*100 5. Calculate the CPI for 2021. Show your work. 120% (90/75)*100 Part 2: Percent Change Practice- The nation of Macrostan keeps the same goods in a market basket from year to year and has hired you as its Bureau of Economic Indicator Statistics Chief. Below is the price of the market basket from 2023 to 2028. Use the data to find the inflation rate and CPI for each of the following years. Inflation Rate Between Each Year CPI 5. 2023 to 2024 __6.6%_____ 2023 __90%__ 6. 2024 to 2025 ___6.6%__ 2024 __90