question1 suppose the only data available on prices in a certain region of zambi
ID: 3067603 • Letter: Q
Question
question1
suppose the only data available on prices in a certain region of zambia come from two different sources. the price indexes from the two sources are shown in the accompanying table. note tat the sources use deferent base years.
1. splice the two indexes to form a single series having base year 2000
2.splice the indexes using 2006 as base year
3. is the recent increase in prices from 2003 to 2005 independent of the base year. check by using your answers in parts (a) and (b)
Explanation / Answer
Spliced Index(Base 2000) = (Index of Source 2 of Current Year x Index of Source 1 of Common year) / 100
Spliced Index(Base 2004) = (Index of Source 1 of Current Year x 100) / Index of Source 1 of Common Year (i.e 2004)
Spliced Index(Base 2006) = (Original Spliced Index of Current Year(Base 2004) x 100)/ Spliced Index of Year 2006
In the Base Year 2000 Price Index Increases by 6 every year from 2003-05 (115-121-127.05)
In the Base Year 2004 Price Index Increases by 5 every year from 2003-05 (95.04-100-105)
In the Base Year 2006 Price Index Increases by approx 4.5 every year from 2003-05 (85.62-90.09-94.60)
So we see that as we increase the base year the there is decrease in the increase of Price Index from 2003-05.So Increase in prices is some what dependent on the choice of base year.
Year Source 1 Source 2 Spliced Index Base 2000 Spliced Index Base 2004 Spliced Index Base 2006 2000 100 100 100*100/121 = 82.64 82.64 * 100/111 = 74.45 2001 108 108 108*100/121 = 89.26 89.26*100/111 = 80.41 2002 112 112 112*100/121 = 92.56 92.56*100/111 = 83.39 2003 115 115 115*100/121 = 95.04 95.04*100/111 = 85.62 2004 121 100 121*100/100 = 121 121 * 100/121 = 100 100*100/111 = 90.09 2005 105 121*105/100 = 127.05 105 105*100/111 = 94.60 2006 111 121*111/100 = 134.31 111 111*100/111 = 100Related Questions
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