Consider the case of Ronald. Let the prices and consumptions in the base year be as in situation D, where p₁ = 3, p₂ = 1, x₁ = 5, and x₂ = 15. If in the current year, the price of good 1 is $1 and the price of good 2 is $4, and Ronald's current consumptions of good 1 and good 2 are 25 and 5 respectively, what is the Laspeyres price index of current prices relative to base year prices? (Pick the most nearly correct answer.)

Question

Quizplus · Accepted Answer

The Laspeyres price index is calculated as (p1_current * x1_base + p2_current * x2_base) / (p1_base * x1_base + p2_base * x2_base). Substituting the given values: (1*5 + 4*15) / (3*5 + 1*15) = (5 + 60) / (15 + 15) = 65 / 30 = 2.17.

Consider the Case of Ronald