Question
Asked Mar 13, 2020
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Between 2012 and 2013, the cost of a typical consumer’s market basket in Quarterville increased from 31 to 34.

Assuming 2012 is the base year, calculate the index number for this market basket in 2012.

Assuming the same base year, calculate the index number for this market basket in 2013.

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Expert Answer

Step 1

Index number shows the change in a variable over time.

It can be calculated as follows:

Economics homework question answer, step 1, image 1

Here, I01 = Index number of year 1 taking year 0 as the base year.

I1 = Consumer basket in year 1

I0 = Consumer basket in year 0

 

Step 2

Now, 2012 is taken as the base year. So, the index number for market basket in 2012 can be calculated as:

I2012 = Consumer basket in 2012

Economics homework question answer, step 2, image 1

 

Index number in 2013 taking 2012 as the base year can be calculated as:

I2013 = Consumer basket in 2013

Economics homework question answer, step 2, image 2

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