Question

The Royal Commission Pediatrics Clinic has been in business for 18 years. The office manager notices that prices of clinic materials and office suppliers fluctuate over time. To get a handle on the price trends for running the clinic, the office manager examined prices of six items the clinic uses of its operation. Shown here are the items, their prices, and the quantities for the years 2010 and 2011. Use these data a. b. Compute the Laspeyres price index for the year 2011 using 2010 as the base year Compute the Passche index number for 2011 using 2010 as the base year 2010 2011 Items Price Price Quantit 150 60 Quantity ( Item 1 Item 2 Item 3 Item 4 Item 5 Item 6 6.95 1.45 6.25 4.95 13.20 135 65 6.70 1.35 5.10 4.50 11.95 7.90 25 30

Answer 1

a. The Laspeyres price index for the year 2011 using 2010 as the base year is given as x100 (6.95x150)+(1.45x 60)+(6.25x8)+ (4.95x25)+(13.2x6)+(9x4) x100 (6.7x150)+(1.35x60)+(5.1x8)+ (4.5x25)+(11.95x6)+(7.9x4) 1418.45 -_-X100 1342.6 -1.0569861x100 105.70 Thus, the Laspeyres price index for the year 2011 using 2010 as the base year is 105.70 The Passche price index for the year 2011 using 2010 as the base year is given as 100 (6.95x135)+ (1.45x65)+(6.25x12)+ (4.95x30)+(13.2x8)+(9x2) x100 (6.7x135)+(1.35x65)+(5.1x12)+ (4.5x30)+(11.95x8)+(7.9x2) 1379.60 1299.85 1.061353233x100 106.14 x 100 Thus, the Passche price index for the year 2011 using 2010 as the base year is 106.14 The Passche quantity index for the year 2011 using 2010 as the base year is given as OP senn x100 (135x6.95)+(65x1.45)+(12x6.25)+ (30x4.95)+(8x13.2)+(2x9) (150x6.95)+(60x1.45)+(8x6.25)-+ 100 (25x4.95)+(6x13.2)+(4x9) 1379.60 141845*100 0.972610948x100 97.26 Thus, the Passche quantity index for the year 2011 using 2010 as the base year is 97.26