Page 149 - Microsoft Word - 00 BA3 IW Prelims STUDENT.docx

Index numbers

Question 9

Aggregate 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 aggregate quantity index using current year prices as the
weighting.

∑ w×Q 1
Aggregate quantity Index = × 100
∑ w×Q 0

Index = [$10.60 × 63 + $8.80 × 189 + $19.55 × 255 + $25.75 × 1,100]/($10.60 ×
60 + $8.80 × 175 + $19.55 × 250 + $25.75 × 1,000) × 100

Index = $35,641.25/$32,813.50 × 100 = 108.6

Illustrations and further practice

Now read illustration 5 and try TYUs 6 to 9 from Chapter 9

143