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Chapter 9

Question 8

Relative quantity index

A manager wishes to index the prices of four of its products between last year
as the base year and this year’s prices. The price and quantity information is as
follows:

Last year This year
Product Price ($) Quantity Price ($) Quantity
(units) (units)
A $10.00 60 $10.60 63
B $8.00 175 $8.80 189
C $17.00 250 $19.55 255
D $25.00 1,000 $25.75 1,100

Calculate the current weighted quantity index using prices as the weighting.
Last year This year
Product Price ($) Quantity Price ($) Quantity Q 1/Q 0
(units) (units)
A $10.00 60 $10.60 63 1.05
B $8.00 175 $8.80 189 1.08
C $17.00 250 $19.55 255 1.02
D $25.00 1,000 $25.75 1,100 1.10

∑ [w×(Q /Q )]
0
Relative quantity Index = 1 × 100
∑ w

Index = [$10.60 × 1.05 + $8.80 × 1.08 + $19.55 × 1.02 + $25.75 × 1.1]/($10.60
+ $8.80 + $19.55 + $25.75) × 100

Index = $68.90/$64.70 × 100 = 106.5

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