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 Paasche quantity index for 2005 with 2002 as base.

Answer 1

To calculate the Paasche quantity index for 2005 with 2002 as the base year, we can use the formula:

Paasche Quantity Index = (Σ(p1q1) / Σ(p0q1)) * 100

First, we calculate the values of p1q1, p0q1:

For Product I:
p1q1 = 70 * 40 = 2800
p0q1 = 60 * 50 = 3000

For Product II:
p1q1 = 40 * 40 = 1600
p0q1 = 50 * 20 = 1000

For Product III:
p1q1 = 30 * 40 = 1200
p0q1 = 30 * 30 = 900

Now, we sum up the values of p1q1 and p0q1:

Σ(p1q1) = 2800 + 1600 + 1200 = 5600
Σ(p0q1) = 3000 + 1000 + 900 = 4900

Plugging these values into the formula:

Paasche Quantity Index = (5600 / 4900) * 100
Paasche Quantity Index = 114.29

Therefore, the Paasche quantity index for 2005 with 2002 as the base year is 114.29.