For commodities A and B, base prices and quantities are Rs. 4 and 10, and Rs. 6 and 5. Current prices are Rs. 5 and Rs. 8. What is the Laspeyres price index?
Correct answer: C. 128.57
- A. 120.00
- B. 125.00
- C. 128.57
- D. 132.50
Explanation
Using base quantities, the numerator is (5 × 10) + (8 × 5) = 90 and the denominator is (4 × 10) + (6 × 5) = 70. Therefore, the index is 90 ÷ 70 × 100 = 128.57.
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About Index Numbers
Index numbers measure relative changes in prices, quantities or values over time using a base period. Work includes simple and weighted price indices, aggregate methods, consumer price calculations, percentage change and purchasing power, with attention to choosing a base year and interpreting an index rather than treating it as an absolute amount.
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