Chapter 14.1, Problem 14.14ACI

Production and price of metals. The level or price and production of metals in the United States is one measure of the strength of an industrial economy. The table at the bottom of the page lists the annual prices (in dollars per ton) and production (in millions of tons) for three metals—copper, aluminum, and iron scrap—from 2011 to 2015.

a. Compute the simple composite price and quantity indexes for the 5-year period, using 2011 as the base period.

b Compute the Laspeyres price index for the 5-year period, using 2011 as the base period.

c. Plot the simple composite and Laspeyres indexes on the same graph. Comment on the differences.

d Compute the Paasche price index for the 5-year period. using 2011 as the base period.

e. Plot the Paasche and Laspeyres indexes on the same graph. Comment on the differences.

f. Compare the Paasche and Laspeyres index values tor 2013 and 2015. Which index is more appropriate tor describing the change in this 2-year period? Explain.