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Fundamentals of Business Economics

CHAPTER 9 – INDEX NUMBERS

9.1 D

We need to convert £600m into 20X8 prices, so:

£600m × 100/120 = £500m

So, in real terms, the economy between 20X8 and 20X9 remained the same.

9.2 B

20X9 monthly pay = 2,000 × 144/125 = $2,300 per week (to the nearest $10).

9.3 C

Index for 20X1 = $3.57/$4.10 × 100 = 87

Index for 20X5 = $5.00/$4.10 × 100 = 122

9.4 B

Year 20X1 20X2 P 1/P 0 w × P 1/P 0

P 0 Q 0 P 1 Q 1

Widgets $10.50 100 $11.55 109 1.1 110

Wodgets $25.00 25 $26.25 30 1.05 26.25

Thingies $53.00 1,100 $54.06 1,155 1.02 1,122

Index = ∑ [w × (p 1/p 0)]/∑w × 100

Index = [110 + 26.25 + 1,122]/(100 + 25 + 1,100) × 100

Index = 1,258.25/1,225 × 100 = 103

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