The following information was recorded for a range of DIY items.
a. Construct a simple price index for item Y using Year 0 as the base year.
b. Determine the simple aggregate price index using Year 0 as the base year.
c. Determine the price relatives index using Year 0 as the base year.
d. Calculate the Laspeyres price index using Year 0 as the base year.
e. Calculate the Paasche price index using Year 0 as the base year.
f. Calculate the Laspeyres quantity index using Year 0 as the base year. Note: here we wish to keep prices fixed, and thus the appropriate formula is:
g. Calculate the Paasche quantity index using Year 0 as the base year. Note: here we are using the current year prices as the fixed weights, and thus the appropriate formula is:
h. Why do the Laspeyres and Paasche indices give such different answers for Year 2 in Parts (d) to (g)?