Question

QUESTION 4

1. We are given the following information about prices and quantities

   consumed for four commodities over the last three years\:

   Commodity       Price (c/kg)           Quantity (kg)

                   1992  1993              1992   1993

       A            72    81               720     960

       B            96    132              120    240

       C            48    63               720    600

       D            48    24               3600    2400

   Compute the value of the Paasche price index for 1993, using 1992 as the base year.

   Specify to 2 dec. pl.

Answer 1

COMMODITY	PRICE(C/KG) 1992(P0)	PRICE(C/KG) 1993(P1)	QUANTITY(KG) 1992(Q0)	QUANTITY(KG) 1993(Q1)	P1Q1	P0Q1
A	72	81	720	960	77760	69120
B	96	132	120	240	31680	23040
C	48	63	720	600	37800	28800
D	48	24	3600	2400	57600	115200
					P1Q1 =204840	P0Q1 =236160

P₁= CURRENT YEAR PRICE

P₀= BASE YEAR PRICE

Q₁=CURRENT YEAR QUANTITY

Q₀=BASE YEAR QUANTITY

      

             PAASCHE PRICE INDEX=P₁Q₁ / P₀Q₁ x 100

           

            204840 / 236160 x 100 = 86.74