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Describe monthly purchase by an average farm family

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Reference no: EM131100013

The following historical data describe monthly purchase by an average farm family:

Commodity              2002                          2012

                               Price    Qty               Price       Qty 

Milk (L)                 $1.30      30              $1.40        30

Butter (kg)           $2.00       3               $2.75         2

Eggs (dozen)       $1.60       8               $2.00         4

Sugar (kg)            $1.70      14             $2.40        10

a) Compute the Laspeyres price index, using 2002 as the base year. My Answer for a) P= ΣPnQ0/ΣP0Q0(100) 99.65/81.60(100) = 122.13

b) Assume that your index, calculated in (a), applied in general for all foods. Suppose a certain family spent $1500 in 2002 and $2500 in 2012. In which of the two years would the family have had more to eat for their money? Show your rational. (No idea how to answer b)

Reference no: EM131100013

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