Exhibit 19-6.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. Refer to Exhibit 19-6.Compute 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

Exhibit 19-6.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.  Refer to Exhibit 19-6.Compute 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

The formula for Laspeyres price index is:

LPI = ( ΣP₁Q₀ ) / ( ΣP₀Q₀ ) x 100
where, 
P₁ = price in current year (2002)
P₀ = price in base year (2000)
Q₀ = quantity sold in base year (2000)

Using the given data, we get:
ΣP₁Q₀ = (30x100) + (20x250) + (15x200) = 5000
ΣP₀Q₀ = (25x100) + (15x250) + (10x200) = 4500

LPI = (5000/4500) x 100 = 111.11

Therefore, the Laspeyres price index for 2002, using 2000 as the base year, is 111.11.

The closest option to this answer is A) 106.07. This option is the best choice.