Questions:
1. Suppose you purchased 5 apples and 3 oranges last week. Apples cost $0.75 per apple, and oranges were $1.00 per orange. How much did you spend on fruit? (Assume the only fruit you purchased was apples and oranges).
2. This week your purchases of apples and oranges remained the same (5 apples and 3 oranges), but the price of apples increased to $1.00 and the price of oranges increased to $1.50. How much did you spend on fruit this week? How are the answers to question 1 and 2 related to the concept of CPI?
3. What was the percentage increase in expenditures on fruit from last week to this week? How is this related to the rate of inflation?
4. Suppose next week the price of apples remains at $1.00, but the price of oranges increases to $50.00 (that's not a typo). If your purchases of apples and oranges remained constant (5 apples and 3 oranges), how much would you spend on fruit? What is the percent increase in your expenditures on fruit?
5. Would the quantity of oranges and apples purchased actually remain the same? Based on that answer, do the percentage increases in "fruit expenditures" you calculated in questions 3 and 4 reflect your "cost of living" (or "cost of fruit purchases") accurately?