Assume that the market basket of goods and services purchased in 2014 by the average family in Canada costs $14,000 in 2014 prices, whereas the same basket costs $21,000 in 2019 prices. However, the basket of goods and services actually purchased by the average family in 2019 costs $20,000 in 2019 prices, whereas this same basket would have cost $15,000 in 2014 prices. Given these data, a Laspeyres price index of 2019 prices using 2014 as the base year would be:

Question

Quizplus · Accepted Answer

The Laspeyres price index is calculated by taking the cost of the base year basket at current year prices divided by the cost of the base year basket at base year prices. Here, it is $21,000 (2019 prices) / $14,000 (2014 prices) = 1.50.

Assume That the Market Basket of Goods and Services Purchased