Which of the Following Is the Correct Interpretation of a Laspeyres

question 24

Multiple Choice

Which of the following is the correct interpretation of a Laspeyres price index of 135, where the base year is 2007 and the current year is 2010?

• A)According to the Laspeyres price index, prices have risen by 35% from 2007 to 2010.
• B)According to the Laspeyres price index, prices have risen by 135% from 2007 to 2010.
• C)According to the Laspeyres price index, prices have risen by 35% from 2010 to 2007.
• D)None of these choices are correct.

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Definitions:

Quantity Demanded

The total amount of a good or service that consumers are willing and able to purchase at a given price level in a specified time period.

Elastic

describes a situation where the quantity demanded or supplied changes significantly in response to price changes.

Total Revenue

The entire amount of income generated by the sale of goods or services before any expenses are deducted.

Price Lowered

A reduction in the cost of goods or services.