Page 251 - DECO504_STATISTICAL_METHODS_IN_ECONOMICS_ENGLISH

Unit 19: Methods—Weighted Average of Price Relatives

Solution: Computing price index by applying weighted average of Price Relatives. Notes

Commodities p q p p q p q
0 0 1 1 0 0 0
Sugar 10 6 15 90 60
Rice 20 10 25 250 200
Milk 10 8 14 112 80
∑pq = 452 ∑ pq = 340
00
10
∑ pq
10
p 01 = ∑ pq × 100
00
452
= × 100
340
= 132.94
Example 4: Using the following data construct in index for 2010 taking 2009 as base by the average
of relatives method using arithmetic and geometric mean:

Commodity Price in 2009 Price in 2010
A 500 700
B 400 600
C 800 900
D 110 120
E 20 20
Solution:

Commodity p p p / p × 100 log p / p × 100
0 1 1 0 1 0
A 500 700 140 2.1461
B 400 600 150 2.1761
C 800 900 112.5 2.0512
D 110 120 109.1 2.0378
E 20 20 100 2.0000
∑ p 1 × 100
p 0 = 611.6

p
∑ log 1 × 100 = 10.4112
p 0

⎛ p ⎞
∑ 1 × ⎜ 100 ⎟ 611.6
Using arithmetic mean, P = ⎝ p 0 ⎠ = = 122.32.
01 5
N
Using geometric mean,

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