If the Laspeyres quantity index exceeds 1, then:
A)the consumption bundle in period 1 is preferred to that of period 0.
B)both consumption bundles are equally preferred.
C)the consumption bundles cannot be compared.
D)the consumption bundle in period 0 is preferred to that of period 1.

Question

Quizplus · Accepted Answer

If the Laspeyres quantity index exceeds 1, it means that the quantity of goods and services consumed in period 1 is greater than the quantity consumed in period 0, using period 0 prices as weights. This indicates that the consumer is better off in period 1 as they are able to consume a larger amount of goods and services. Therefore, the consumption bundle in period 1 is preferred to that of period 0.

If the Laspeyres Quantity Index Exceeds 1, Then