Question

using table 1: calculate the paasche price index between 2017 and 2018
table 1: gdp country x: 2017
table 2: gdp country x: 2018
grading
description
maximum points
3 point
please submit homework by 11:59 pm on october 27th. the problem set is worth 3 points and you will have unlimited attempts. your grade on your last attempt will be your grade on the assignment
attempts
unlimited
any new attempts will be marked as late.

Explanation:

Step1: Calculate the total cost in the current year ($P_1Q_1$)

The formula for the Paasche Price Index is $P=\frac{\sum P_1Q_1}{\sum P_0Q_1}\times100$. First, find $\sum P_1Q_1$.
For cars: $P_1 = 40000$, $Q_1=10$, so $P_1Q_1=40000\times10 = 400000$.
For restaurant meals: $P_1 = 20$, $Q_1 = 10000$, so $P_1Q_1=20\times10000=200000$.
Then $\sum P_1Q_1=400000 + 200000=600000$.

Step2: Calculate the total cost in the base year ($P_0Q_1$)

For cars: $P_0 = 30000$, $Q_1 = 10$, so $P_0Q_1=30000\times10=300000$.
For restaurant meals: $P_0 = 40$, $Q_1 = 10000$, so $P_0Q_1=40\times10000 = 400000$.
Then $\sum P_0Q_1=300000+400000 = 700000$.

Step3: Calculate the Paasche Price Index

Using the formula $P=\frac{\sum P_1Q_1}{\sum P_0Q_1}\times100$, substitute the values: $P=\frac{600000}{700000}\times100=\frac{6}{7}\times100\approx85.71$.

Answer:

The Paasche Price Index is approximately $85.71$.