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    Simple Price Index numbers

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    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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