Practice - Example 2: Calculation of weighted aggregative price index
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Practice Questions
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What is a simple aggregative price index?
💡 Hint: Think of an index that doesn't consider how much you buy.
What does Laspeyres index use for its calculations?
💡 Hint: Which period is being used to calculate change?
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Interactive Quizzes
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What does a weighted price index take into account?
💡 Hint: Which factor helps prioritize items in economic analysis?
The Laspeyres price index uses which quantities for calculation?
💡 Hint: Remember which time period is being referred to for weights.
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Challenge Problems
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Using the data below, calculate the weighted price index using both Laspeyres and Paasche methods:\nCommodity Data: Base Year: A(2, 20), B(5, 30), C(10, 25)\nCurrent Year: A(4, 25), B(7, 35), C(10, 30)
💡 Hint: Pay attention to be consistent with weights and periods.
Discuss how a sudden increase in the price of a staple commodity affects both Laspeyres and Paasche indices differently.
💡 Hint: Consider how consumers adapt to new price levels.
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