Question

The median sales prices for new single-family homes for the years 1998-2001 are as follows. Use 1998 as the base year and develop a price relative for new single-family homes for each year over this 4-year period. Year Price ($1000s) 1998 152.5 1999 161.0 2000 169.0 2001 175.2

Answer 1

According to the data, we have the median prices for new single-family homes for the years 1998-2001.

We need to develop a price relative using 1998 as the base year. This means we need to find by how much, have the prices of homes changed over the years, considering 1998 as the base/standard year.

A simple formula for this is:

Price Relative=   

By this notation, if we calculate the price relative for the base year, it will be 100 (as, both numerator and denominatior will be equal).

Year	Price($1000s)	Price Relative Formula	Price Relative in % (Base year 1998)
1998	152.5	(152.5/152.5)*100	100
1999	161.0	(161.0/152.5)*100	105.57
2000	169.0	(169.0/152.5)*100	110.81
2001	175.2	(175.2/152.5)*100	114.88

Hence, comparing to the base as 100, we can easily understand from the solution that the prices of homes have increased in each subsequent year.