Three firms,X,Y,and Z,operate in the same industry,although their products have different features and are priced differently.The following table provides the prices and the quantities sold (in units)during the period 2000-2002. Which of the following is the Laspeyres price index for 2002,using 2000 as the base year?
A) 106.07
B) 106.3
C) 94.28
D) 94.08

Question

Three firms,X,Y,and Z,operate in the same industry,although their products have different features and are priced differently.The following table provides the prices and the quantities sold (in units)during the period 2000-2002.  Which of the following is the Laspeyres price index for 2002,using 2000 as the base year?
A) 106.07 
B) 106.3 
C) 94.28 
D) 94.08

Quizplus · Accepted Answer

To calculate the Laspeyres price index for 2002 using 2000 as the base year, we need to take the base year quantities and multiply them by the current year prices, then divide by the base year prices and sum across all three products.

For product X:
(2000 quantity) * (2002 price of X) / (2000 price of X) = (100 * 120) / 100 = 120

For product Y:
(2000 quantity) * (2002 price of Y) / (2000 price of Y) = (50 * 90) / 80 = 56.25

For product Z:
(2000 quantity) * (2002 price of Z) / (2000 price of Z) = (150 * 60) / 70 = 128.57

Now we sum these values and divide by the sum of the base year quantities:
(120 + 56.25 + 128.57) / (100 + 50 + 150) = 304.82 / 300 = 1.01607

So the Laspeyres price index for 2002 using 2000 as the base year is approximately 106.07, which means that prices on average have increased by 6.07% compared to 2000. Therefore, the correct answer is A.

Three Firms,X,Y,and Z,operate in the Same Industry,although Their Products Have