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 Laspeyres price index for 2005 with 2002 as base.

106.12


112.5


94.8


87.5


98.4

Answer 1

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

Laspeyres price index = (Σp1q0 / Σp0q0) * 100

Calculating for each product:

For Product I:
p1q0 = 70 * 50 = 3500
p0q0 = 60 * 50 = 3000

For Product II:
p1q0 = 40 * 20 = 800
p0q0 = 50 * 20 = 1000

For Product III:
p1q0 = 30 * 30 = 900
p0q0 = 30 * 30 = 900

Now summing up the values:
Σp1q0 = 3500 + 800 + 900 = 5200
Σp0q0 = 3000 + 1000 + 900 = 4900

Laspeyres price index = (5200 / 4900) * 100 = 106.12

Therefore, the Laspeyres price index for 2005 with 2002 as the base year is 106.12.