# ECON 1P92 Lecture Notes - Lecture 2: Ice Wine, Price Level, Market Basket

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## Document Summary

The average level of all prices in the economy. The rate at which the price level is changing. Based on the price of a typical consumer (cid:858)(cid:271)asket(cid:859) of goods and servi(cid:272)es. Cpi for the base period is set to 100 (always) Cpi in later years shows prices as a ratio of the base period. In the economy of ultimate pleasure , the typical urban household consumes the following goods and services: Cpi in the base year equals 100 b. ) The cpi is a fixed, base weighted index number. Prices rose by 17. 86% from base to current year d. ) have the relative pri(cid:272)es (cid:272)hanged? (cid:894)don(cid:859)t talk a(cid:271)out inflation(cid:895) Yes, the price of chocolate has increased 50% The price of ice wine has increased 20% While the price of back rubs has stayed the same. The percentage change in the cpi from 1995 to 1996 (135. 2-131. 9/131. 9)x100=0. 025x100=2. 50. Price level rose by 2. 5% between january 1995 and january 1996.