Only typed answer The tourist industry is very much interested in understanding how touristsspend money. In order to measure the price changes in three importantcomponents of tourist spending, a statistician calculated the average cost ofa hotel room per night, the cost of one meal, and the cost of car rental perday. The results of this are shown below.Tourist spending component 1985 2011cost ($) Quantity Cost ($) QuantityHotel (one night)55220Meal1026Car rental (one day) 25703a) Calculate a simple price index of a car rental per day, taking 1985 as thebase year. Interpret your answer.68246b) Calculate the simple aggregate price index of tourist spending per day,taking 1985 as a base year.c) Calculate the Laspeyres (LPI), Passche (PPI) and Fisher price index (FPI).Let 1985 -100.d) Discuss one disadvantage of a simple aggregate price index.

CPI (Consumer Price Index) is used as a measure of inflation. It measures the change in prices of a…

The tourist industry is very much interested in understanding how tourists spend money. In order to measure the price changes in three important components of tourist spending, a statistician calculated the average cost of a hotel room per night, the cost of one meal, and the cost of car rental per day. The results of this are shown below. Tourist spending component 1985 2011 cost ($) Quantity Cost ($) Quantity 55 220 26 70 Hotel (one night) Meal 10 6 Car rental (one day) 25 3 a) Calculate a simple price index of a car rental per day, taking 1985 as the base year. Interpret your answer. 6 8 2 4 b) Calculate the simple aggregate price index of tourist spending per day, taking 1985 as a base year. c) Calculate the Laspeyres (LPI), Passche (PPI) and Fisher price index (FPI). Let 1985 =100. d) Discuss one disadvantage of a simple aggregate price index.