Determine the simple aggregate price index

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Reference no: EM131064470

The following information was recorded for a range of DIY items.

a. Construct a simple price index for item Y using Year 0 as the base year.

b. Determine the simple aggregate price index using Year 0 as the base year.

c. Determine the price relatives index using Year 0 as the base year.

d. Calculate the Laspeyres price index using Year 0 as the base year.

e. Calculate the Paasche price index using Year 0 as the base year.

f. Calculate the Laspeyres quantity index using Year 0 as the base year. Note: here we wish to keep prices fixed, and thus the appropriate formula is:

g. Calculate the Paasche quantity index using Year 0 as the base year. Note: here we are using the current year prices as the fixed weights, and thus the appropriate formula is:

h. Why do the Laspeyres and Paasche indices give such different answers for Year 2 in Parts (d) to (g)?

Reference no: EM131064470

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