The economy produces three goods: Cell Phones, Computers and Cars. In this economy, cell phone and computer prices have been falling over time, while car prices have increased over time. The prices and quantities of these goods, in two different years (year 1 and year 2), are given below 1 2 Quantity of Cell Phones 100 Quantity of Computers Quantity of Cars Price of Cell Phones (8) 100 Price of Computers (8) Price of Cars (8) 150 50 100 10 12 80 1000 600 5000 8000 a Use a Laspeyres index to determine how much prices have changed from year 1 to year 2. Show your working. (Hint: You will first construct real aDP growth using Laspeyres index) b. Use Paasche index to determine how much prices have changed from year 1 to year 2. Show your working. (Hint: You will first construct real GDP growth using Paasche index)
The economy produces three goods: Cell Phones, Computers and Cars. In this economy, cell phone and computer prices have been falling over time, while car prices have increased over time. The prices and quantities of these goods, in two different years (year 1 and year 2), are given below 1 2 Quantity of Cell Phones 100 Quantity of Computers Quantity of Cars Price of Cell Phones (8) 100 Price of Computers (8) Price of Cars (8) 150 50 100 10 12 80 1000 600 5000 8000 a Use a Laspeyres index to determine how much prices have changed from year 1 to year 2. Show your working. (Hint: You will first construct real aDP growth using Laspeyres index) b. Use Paasche index to determine how much prices have changed from year 1 to year 2. Show your working. (Hint: You will first construct real GDP growth using Paasche index)
Principles of Macroeconomics (MindTap Course List)
7th Edition
ISBN:9781285165912
Author:N. Gregory Mankiw
Publisher:N. Gregory Mankiw
Chapter11: Measuring The Cost Of Living
Section: Chapter Questions
Problem 3PA
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