Question

Suppose seafood price and quantity data for the years 2000 and 2009 follow. Use 2000 as the base period. Seafood 2000 Qty. (lb) 2000 Price ($/lb) 2009 Price ($/lb) Halibut 75,190 2.01 2.33 Lobster 83,080 3.62 3.09 Tuna 50,779 1.87 1.97 (a) Compute a price relative for each type of seafood. (Round your answers to one decimal place.) Seafood Price Relative Halibut Lobster Tuna (b) Compute a weighted aggregate price index for the seafood catch. (Round your answer to one decimal place.)

Answer 1

a) Price Relative for Halibut is 115.9 (1 d.p)

Price Relative for Lobster is 85.4 (1 d.p)

Price Relative for Tuna is 105.4 (1 d.p)

b) The Weighted Aggregate Price Index for the seafood catch is 98.4.

Step-by-step explanation:

a) The Price Relative for a good refers to it's current price divided by it's base price times 100. It therefore measures a change in price across different periods.

Writing the formula as stated is,

Price Relative = Current Price / Base Price * 100

Price Relative for Halibut = 2.33/2.01 * 100

= 115.9 (1 d.p)

Price Relative for Lobster = 3.09/3.62 * 100

= 85.4 (1 d.p)

Price Relative for Tuna = 1.97/1.87 * 100

= 105.35

= 105.4 (1 d.p)

b) The Weighted Aggregate Price Index enables us to see how prices in a particular basket has changed over a period of time. It is calculated as follows,

Weighted Price Index = (Sum of Weighted Current Price ) / ( Sum of weighted Base Price) * 100

Sum of Weighted Current Price = (75,190 * 2.33) + (83,080 * 3.09) + ( 50,779 * 1.97)

= 538,124.53

Sum of Weighted Base Price = (75,190 * 2.01) + (83,080 * 3.62) + ( 50,779 * 1.87)

= 546,838.23

Weighted Price Index = (538,124.53 / 546,838.23) *100

= 98.4

The Weighted Aggregate Price Index for the seafood catch is 98.4.