CIMA BA1 · Chapter 10 · Question 4 of 10
Using the same data: Item X: base price $4, base quantity 10, current price $5, current quantity 8 Item Y: base price $10, base quantity 5, current price $11, current quantity 7 What is the Paasche price index for the current period (base = 100, to one decimal place)?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: A) 114.7
Explanation
Paasche = sum(p1 x q1) / sum(p0 x q1) x 100. Numerator = 5 x 8 + 11 x 7 = 40 + 77 = 117. Denominator = 4 x 8 + 10 x 7 = 32 + 70 = 102. Index = 117 / 102 x 100 = 114.7. Dividing 117 by the base value of 90 gives 130.0, which is a value index, not a price index.
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