-Using the above table, the following is the output of a two-product economy. The price index in this economy in Year 2, assuming Year 1 is the base year, is
A) 113.0.
B) 88.5.
C) 107.1.
D) 106.7.

Question

-Using the above table, the following is the output of a two-product economy. The price index in this economy in Year 2, assuming Year 1 is the base year, is
A) 113.0. 
B) 88.5. 
C) 107.1. 
D) 106.7.

Quizplus · Accepted Answer

The price index is calculated as the weighted average of the price changes of the two products, where the weights are the base year quantities. In this case, the price index in Year 2 is:(100 * 1.1) + (50 * 0.9) / (100 + 50) = 113.0

-Using the Above Table, the Following Is the Output of a Two-Product