Question

By using the data in the table below, calculate for 2005 with 2002 as base year:


2002 2005
Product p0 q0 p1 q1 p1q0 p0q0 p1q1 p0q1
I 60 50 70 40
II 50 20 40 40
III 30 30 30 40
Total A B C D E F


Find Fischer price index for 2005 with 2002 as base.

Answer 1

To calculate the Fischer price index for 2005 with 2002 as base year, we will use the formula:

Fischer Price Index = (Total Expenditure in the current year / Total Expenditure in the base year) * 100

First, we need to calculate the total expenditure in both years using the given data:

For 2002:
Total Expenditure (A) = p0q0 + p1q0 + p0q1
Total Expenditure for Product I = 60*50 + 70*40 + 60*40 = 3000 + 2800 + 2400 = 8200
Total Expenditure for Product II = 50*20 + 40*40 + 50*40 = 1000 + 1600 + 2000 = 4600
Total Expenditure for Product III = 30*30 + 30*40 + 30*40 = 900 + 1200 + 1200 = 3300

Total Expenditure in 2002 (A) = 8200 + 4600 + 3300 = 16100

For 2005:
Total Expenditure (B) = p1q1 + p1q0 + p0q1
Total Expenditure for Product I = 70*40 + 70*40 + 60*40 = 2800 + 2800 + 2400 = 8000
Total Expenditure for Product II = 40*40 + 40*40 + 50*40 = 1600 + 1600 + 2000 = 5200
Total Expenditure for Product III = 30*40 + 30*40 + 30*40 = 1200 + 1200 + 1200 = 3600

Total Expenditure in 2005 (B) = 8000 + 5200 + 3600 = 16800

Now, we can calculate the Fischer Price Index for 2005 with 2002 as base year:

Fischer Price Index = (16800 / 16100) * 100
Fischer Price Index = 104.34

Therefore, the Fischer Price Index for 2005 with 2002 as base year is 104.34.