ECO402 Microeconomics Assignment 1 Solution Fall 2017

Assignment 1
Prepared by Samil Rajpoot

A. By assuming Jan-2015 as base year, find real price of chicken, eggs and tea in each year. After stepwise calculation, you are required to complete the following table for answer.

By using the formula

Item Unit Year Nominal Price CPI Real Price
Chicken
(Live)
3 kg Jan -2015 400.50 203.62 400.50
Jan -2016 421.13 184.93 463.70

Jan -2017 450.63 153.54 597.65
Eggs
Dozen Jan -2015 115.20 238.54 115.20
Jan -2016 103.75 205.86 120.23
Jan -2017 128.13 251.58 121.48
Tea
(packet)
200gms Jan -2015 128.42 215.61 128.42
Jan -2016 189.47 284.13 143.77
Jan -2017 190.95 266.44 154.52

Solution :

Chicken (Live) 3KG

Year 2015

Real Price = 203.62/203.62*400.50 = 400.50

B. If base year bundle has 3 kg chicken, 1 dozen eggs and 200gms tea, than find Laspeyres index by assuming Jan-2015 as base year and Jan-2017 as current year. 

Solution:
Laspeyres Index = 119

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