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Question

Construct and index of prices using 2004 as the base year and Price Relatives Method:
Goods Weight 2014 2016 2017
A

B

C
5

3

2
10

5

4
12

6

5
14

8

7

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Solution

Construction of Price Index for the year 2013
Goods Weight
(W)
2004 Price
(P0)
2013 Price
(P1)
R=P1P0×100 RW
A 5 10 12 1210×100=120 600
B 3 5 6 65×100=120 360
C 2 4 5 54×100=125 250
ΣW = 10 ΣRW = 1210

P01=ΣRWΣWor, P01=121010=121


Construction of Price Index for the year 2014
Goods Weight
(W)
2004 Price
(P0)
2014 Price
(P2)
R=P2P0×100 RW
A 5 10 14 1410×100=140 700
B 3 5 8 85×100=160 480
C 2 4 7 74×100=175 350
ΣW = 10 ΣRW = 1530

P02=ΣRWΣWor, P02=153010=153

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