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2 cards from this section. Quick, good the night before a test.
Define an index number.
Think about how we measure price changes over time.
What is a relative price?
Consider the comparison between current and past prices.
What is the formula for calculating the Laspeyre index?
Consider how weights influence the index.
True or False: Paasche’s index uses base period quantities as weights.
Think about what the term 'Paasche' means in terms of periods.
You are given the prices of vegetables over two years: 2019 Prices (Potatoes - Rs 20, Tomatoes - Rs 30, Onions - Rs 25) and 2021 Prices (Potatoes - Rs 25, Tomatoes - Rs 35, Onions - Rs 30). Calculate both the Laspeyre and Paasche indices using weighted averages based on the quantities from 2019.
Break the problem down by calculating each index step-by-step.
A company’s base salary for employees is Rs 3000, and the CPI indicates an increase from 200 to 250. Determine how much salary should be adjusted to maintain living standards.
Apply the CPI to adjust the salary accordingly.
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