Assume that the market basket of goods and services purchased in 2004 by the average family in Canada costs $14,000 in 2004 prices,whereas the same basket costs $21,000 in 2009 prices.However,the basket of goods and services actually purchased by the average family in 2009 costs $20,000 in 2009 prices,whereas this same basket would have cost $15,000 in 2004 prices.Given this data,a Laspeyres index of 2009 prices would be:
A) 1.05.
B) approximately 1.07.
C) approximately 1.33.
D) 1.50.

Question

Quizplus · Accepted Answer

The Laspeyres index is calculated using the formula: (Cost of base year basket at current year prices) / (Cost of base year basket at base year prices). Here, it is ($21,000 / $14,000) = 1.50.

Assume That the Market Basket of Goods and Services Purchased