. Calculate a fixed weight price index for years 2 and 3 in a three-good economy where year one is the base year. Good Good 1 Good 2 Good 3 Year 2 Year 1 PQP 0.30 10 1.00 0.40 5 0.60 10 0.50 8 0.80 10 Q 5 Year 3 P Q 1.50 7 1.20 8 1.00 15

. Calculate a fixed weight price index for years 2 and 3 in a three-good economy where year one is the base year. Good Good 1 Good 2 Good 3 Year 2 Year 1 PQP 0.30 10 1.00 0.40 5 0.60 10 0.50 8 0.80 10 Q 5 Year 3 P Q 1.50 7 1.20 8 1.00 15

Principles of Economics 2e

2nd Edition

ISBN:9781947172364

Author:Steven A. Greenlaw; David Shapiro

Publisher:Steven A. Greenlaw; David Shapiro

Chapter22: Inflation

Section: Chapter Questions

Problem 2SCQ: Construct the price index for a fruit basket in each year using 2003 as the base year.

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Question

2. Calculate a fixed weight price index for years 2 and 3 in a three-good economy where
year one is the base year.
Good
Good 1
Good 2
Good 3
Year 1
P Q
0.30
10
0.40
5
0.50
8
Year 3
Year 2
PQP
5
1.00
0.60 10
0.80
10
Q
1.50 7
1.20 8
1.00 15

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