1.Using 2016 as the base year, calculate the Laspeyre’s Quantity Index for 2021.
A 138.60
B 207.47
C 72.15
D 149.86
2.In general, consumers are price-takers; thus, they are expected to react to price changes by substituting ice-cream
flavours that have become relatively cheaper for those that have become relatively more expensive. This phenomenon is
consistent with the substitution effect. Substitution tends to cause a negative correlation between the price and quantity
relatives.
With regard to the observation above, and the indices calculated above, which of the following is false?
A The transaction data on the ice-cream sales is not indicative of substitution effect.
B The Paasche’s indices are relatively greater than the Laspeyre’s indices.
C The price and quantity relatives of the ice-cream data are positively correlated.
D The price and quantity relatives of the ice-cream data are negatively correlated.
Step by step
Solved in 3 steps
