Econ 362 Hanes
Price index problem set
Do this problem set by using Excel. Write formulas in the relevant cells to calculate the
numbers I ask for.
Print out the spreadsheet on paper and turn that in.
1) Link the two price indexes below to make one price index, base year 2012 = 100
Put your linked price index in the column labelled "Index Linked"
Year
2012
2013
2014
2016
2017
2018
2019
2020
2021
2022
2023
Index
A
100.000
101.354
102.887
103.116
104.148
Index
B
100
96.054
98.317
99.933
101.145
105.621
102.861
Index
Linked
100
101.354
102.887
103.116
104.148
100
102.385
104.058
105.32
109.986
107.119
2) Link the three price indexes below to make one price index, base year 2012 = 100
Put your linked price index in the column labelled "Linked"
Year
2012
2013
2014
2016
Index
A
100.000
101.000
Index
B
100
102
100
94
Index
Linked
100
101
103.02
96.839
LOOK BELOW FOR THE NEXT PART OF THE PROBLEM SET
3) In this part, I give you prices and quantities for three goods in two years.
Make three price indexes, all with base year 1910 = 1:
one that weights by prices in the first year
one that weights by prices in the second year
one that is a Fisher ideal index combining the first two.
For guidance look at the spreadsheet on the class webpage labelled:
"Price indexes: Two goods, two years. Example spreadsheet."
I) What happened in the economy
Year
1910
1911
Hats
Price
1
3
Cigarettes
Kerosene
Quantity
Price
Quantity Price
Quantity
100
10
14
5
26
98
12
9
4
35
II) Using Q's from first year ("Laspeyres")
Year
1910
1911
Hats
Price
1
3
Quantity
100
98
Cigarettes
Kerosene
Price
Quantity
Price
Quantity
10
14
5
26
12
9
4
35
Total
cost
370
572
Index
(1910
= 1)
1.546
III) Using Q's from second year ("Paasche")
Year
1910
1911
Hats
Price
1
3
Cigarettes
Kerosene
Quantity
Price
Quantity
Price
Quantity
100
10
14
5
26
98
12
9
4
35
IV) Geometric average of the two ("Fisher")
Year
1910
1911
Take from
your answers above:
Using
Using
1st yr Qs 2nd yr QsGeometric
(Lasp.)
(Paa.) average Inflation
1.00
1.00
1.00
0.00
1.55
1.49
1.52
0.52
Total
cost
363
542
Index
(1910
= 1)
1.493