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Simple Price Index numbers

16.75

The data file basket.xls contains the prices of a basket of food items from 1992 to 2006. Included are the prices (in dollars)for a one-pound loaf of white bread, a pound of beef (ground Chuck), a dozen grade A large eggs, and one pound of iceberg lettuce:

Year Bread Beef Eggs Lettuce

1992 0.726 1.926 0.933 0.573

1993 0.748 1.970 0.898 0.625

1994 0.768 1.892 0.917 0.506

1995 0.767 1.847 0.882 0.821

1996 0.860 1.799 1.155 0.769

1997 0.862 1.850 1.148 0.651

1998 0.855 1.818 1.120 1.072

1999 0.872 1.834 1.053 0.649

2000 0.907 1.903 0.975 0.748

2001 0.982 2.037 1.011 0.736

2002 1.001 2.151 0.973 1.003

2003 1.042 2.131 1.175 0.734

2004 0.946 2.585 1.573 0.876

2005 0.997 2.478 1.211 0.817

2006 1.046 2.607 1.449 0.874

a. Compute the 1992-2006 simple price indexes for bread, beef, eggs, and lettuce, using 1992 as the base year.

b. Recalculate the price indexes in (a), using 1996 as the base year.

c. Compute the 1996-2006 unweighted aggregate price indexes for the basket of these four food items.

d. Compute the 2006 Laspeyres price index for the basket of these four food items for a family that consumed 50 loaves of bread, 22 pounds of beef, 24 dozen eggs, and 18 pounds of lettuce in 1992.

e. Compute the 2006 Paasche price index for the basket of these four food items for a family that consumed 55 loaves of bread, 17 pounds of beef, 20 dozen eggs, and 28 pounds of lettuce in 2006.

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Solution Summary

The solution provides step by step method for the calculation of index numbers . Formula for the calculation and Interpretations of the results are also included.

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