A family bakery makes cupcakes and sells them at local outdoor festivals. For a music festival, there is a fixed cost of $125 to set up a cupcake stand. The owner estimates that it costs $0.75 to make each cupcake. The owner is interested in determining the total cost C as a function of number of cupcakes made.

a. Find a linear function that relates cost C to x, the number of cupcakes made.

b. Find the cost to bake 160 cupcakes.

c. If the owner sells the cupcakes for $1.50 apiece, how many cupcakes does she need to sell to start making profit? (Hint: Use the INTERSECTION function on a calculator to find this number.)

Econ 202 ~ Chapter 6 ~ Measuring the Cost of Living How the CPI is calculated The consumer price index shows the “cost” of a basket of goods and services “relative to the cost” of the same basket in the base year. The index is used to measure the “overall level of prices” in the economy. The percentage change in the consumer price index measures the inflation rate. CPI measures the overall cost of the goods and services purchased by a typical household. The CPI measures the typical cost of living, inflation and the inflation rate. Inflation rate ~ is the percentage of change in the “current” CPI from a previous CPI CPI = Price of basket of G&S in current year / Price of basket in base year X 100 Inflation rate = CPI (t) – CPI (t-1) / CPI (t-1) X 100 The goal of the CPI is to measure the changes in costs of living How this is done: 1. Fix the basket 2. Find the prices 3. Compute the basket’s cost (this isolates price changes from any quantity changes) 4. Choose a base year and compute the index 5. Compute the inflation rate The BLS (Bureau of Labor and Statistics) calculates several other price indexes. The BLS computes indexes for certain areas; such as, Boston, New York and Los Angeles. The BLS also tracks narrow categories; such as, food, clothing and energy. The BLS (Bureau of Labor and Statistics) also calculates the PPI (Producer Price Index). The PPI measures the “cost” of a basket of goods and services purchased by firms rather than by the consumers. Changes in the PPI are tho