Question

In: Statistics and Probability

Listed below are the price and quantity of several golf items purchased by members of the men’s

Listed below are the price and quantity of several golf items purchased by members of the men’s golf league at Indigo Creek Golf and Tennis Club for 2012 and 2016.

a. Determine the simple aggregate price index, with 2012 as the base period.

b. Determine a Laspeyres price index.

c. Determine the Paasche price index.

d. Determine a value index.

Solutions

Expert Solution

The following data represents the price and quantity of several golf items purchased by members of the men’s golf league at Indigo Creek Golf and Tennis Club:

	2005		2009
	Price	Quantity	Price	Quantity
Diver	250.00	5	275.00	6
Putter	60.00	12	75.00	10
Irons	700.00	3	750.00	4

Calculate the simplex aggregate price index, with 2005 as the base period.

Simple Aggregate Price Index = {(275.00 + 75.00 + 750.00)/(250.00 + 60.00 + 700.00)} × 100

= 1100/1010 × 100

= 108.91%

Hence, the simplex aggregate price index is: 108.91%.

Calculate the Laspeyres price index.

Laspeyres Index = Σ(Observation Price × Base Qty)/Σ(Base Price × Base Qty)

= 4525/4070 × 100

= 111.18%

Hence, the Laspeyres price index is: 118.18%.

Calculate the Paasche price index.

Paasche price index = 5400/4900 × 100

= 110.20%

Hence, the Paasche price index is: 110.20%.

Calculate the value of the index.

Value of the Index = √(Laspeyres price Index) × (Paasche price Index)

= √111.18 × 110.20

= 110.69

Hence, value of the index is: 110.69.

a) Hence, the simplex aggregate price index is: 108.91%.

b) Hence, the Laspeyres price index is: 118.18%.

c) Hence, the Paasche price index is: 110.20%.

d) Hence, value of the index is: 110.69.

Junaid answered 2 years ago

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