Data for fuel oil and gasoline purchased at wholesale prices for 2006 and 2010 are shown next. What is your interpretation of the Laspeyres price index?

Question

Data for fuel oil and gasoline purchased at wholesale prices for 2006 and 2010 are shown next.  What is your interpretation of the Laspeyres price index?

Quizplus · Accepted Answer

The Laspeyres price index is calculated by comparing the cost of a fixed basket of goods at two different points in time. Using the formula for Laspeyres price index (sum of (price in current year x quantity in base year) divided by sum of (price in base year x quantity in base year)), we find that the index value for fuel oil and gasoline in 2006 compared to 2010 is 1.1671, which means the value rose by 16.71%. Therefore, the correct answer is C.

Data for Fuel Oil and Gasoline Purchased at Wholesale Prices