The Table Below Is the Laspeyres Price Index for a Basket

question 23

Essay

The table below is the Laspeyres price index for a basket of goods related to the Computer IT industry. $\begin{array}{|c|c|c|c|c|c|c|c|c|c|c|c|c|}\hline \text { Year } & 1988 & 1989 & 1990 & 1991 & 1992 & 1993 & 1994 & 1995 & 1996 & 1997 & 1998 & 1999 \\\hline \text { Base } & & & & & & & & & & & & \\1988 & 100 & 101.5 & 104.2 & 103.9 & 106.2 & 107.8 & 107.9 & 108 & 108.5 & 109 & 110 & 111.5 \\\hline \begin{array}{c}\text { Base } \\2005\end{array} & & & & & & & & & & & & \\\hline\end{array}$

$\begin{array}{|c|c|c|c|c|c|c|c|c|c|c|c|c|}\hline \text { Year } & 2001 & 2002 & 2003 & 2004 & 2005 & 2006 & 2007 & 2008 & 2009 & 2010 & 2011 & 2012 \\\hline \begin{array}{c}\text { Base } \\1988\end{array} & 112.4 & 113.1 & 114 & 115.4 & 117 & 119.2 & 121.6 & 123.8 & 124.9 & 125.6 & 129.3 & 132.8 \\\hline \begin{array}{c}\text { Base } \\2005\end{array} & & & & & & & & & & & & \\\hline\end{array}$

(a) Calculate and interpret the percentage price change from 2005 to 2013, using the 1988 base
index.
(b) Change the base of this index series to 2005. Explain why a base change may be useful.
(c) Using the series with base 2005 that you created in part (b) recalculate the percentage price change from 2005 to 2013. Interpret.
(d) Compare your answers from parts (a) and (c), in particular explain which value is a change in percentage points and which value is the percentage change.

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Definitions:

Long-Term Memories

Memories that are stored for an extended period, ranging from a few days to decades.

Profound Amnesia

An extreme form of memory loss that obstructs the recall of fundamental personal information and past experiences.

Anterograde Amnesia

A loss of the ability to create new memories after the event that caused the amnesia, while long-term memories from before the event remain intact.

Retrograde Amnesia

The condition in which an individual loses pre-existing memories to some extent, often due to brain damage or psychological trauma.