Question

Consider the following price data from 2002 to 2010

Year	2002	2003	2004	2005	2006	2007	2008	2009	2010
Price	3.34	3.56	3.61	4.06	4.25	4.37	4.68	4.59	4.81

a. Compute the simple price index using 2002 as the base year. (Round your answers to 2 decimal places.)

Year	Price index
2002
2003
2004
2005
2006
2007
2008
2009
2010

b. Update the index numbers with a base year revised from 2002 to 2005. (Round your answers to 2 decimal places.)

Answer 1

	Consider the following price data from 2002 to 2010
	Year	2002	2003	2004	2005	2006	2007	2008	2009	2010
	Price	3.34	3.56	3.61	4.06	4.25	4.37	4.68	4.59	4.81
(a)	Compute the simple price index using 2002 as the base year.
Solution:
	Price index = (Current year price/Base year price)*100
		YEAR	Price	Price Index
		2002	3.34	100
		2003	3.56	106.59
		2004	3.61	108.08
		2005	4.06	121.56
		2006	4.25	127.25
		2007	4.37	130.84
		2008	4.68	140.12
		2009	4.59	137.43
		2010	4.81	144.01
(b)	Update the index numbers with a base year revised from 2002 to 2005.
Solution:
	Price index = (Current year price/Base year price)*100
		YEAR	Price	Price index
		2002	3.34	82.27
		2003	3.56	87.68
		2004	3.61	88.92
		2005	4.06	100
		2006	4.25	104.68
		2007	4.37	107.64
		2008	4.68	115.27
		2009	4.59	113.05
		2010	4.81	118.47