THE INSTITUTE OF FINANCE MANAGEMENT (IFM)

Faculty of Computing, Information Technology and Mathematics

Department Of Mathematics
Tutorial Questions
MTU 07203: Business Statistics I
INDEX NUMBER – 6th July to 17th July, 2020

Question 1
a) Define the following term(s)
i) Index number
ii) Simple index number
iii) Price relative
iv) Quantity relative
v) Simple average relative price index
vi) Simple aggregate price index
vii) Laspeyres index
viii) Paasche’s index
b) What are the uses of index number
c) What are some consideration in the construction of index number

Question 2
The average retail prices of 1 kilogram of potatoes, 1 kilogram of rice and 500 grams of
margarine for each of five years in Sydney are shown in Table below

Item Unit Price of one unit (Tsh)

1983 1985 1987 1990 1992
Potatoes 1 kg 0.64 0.49 0.76 0.93 0.70
rice 1 kg 0.88 0.81 0.92 1.05 1.08
margarine 500 gram 1.01 1.28 1.17 1.44 1.52

Find the price index for each item related to the base year of 1983

Question 3
The average price in Sydney for five items in 1978, 1987 and 1992 are shown in Table below.

Item Unit Price of one unit (Tsh)

1978 1987 1992
Butter 500 g 0.93 1.80 1.62
Sugar 2 kg 0.63 1.58 1.75
sausages 1 kg 1.09 2.65 3.15
rice 1 kg 0.68 0.92 1.08
tea 250 g 0.82 1.43 1.74
Calculate:
a) The simple aggregate index for 1992 using 1978 as the base year.
b) The simple aggregate index for 1992 using 1987 as the base year.
c) Interpret the value of the two simple aggregate indices

Question 4
Use 1987 as the base year, use the data in Table below to calculate the simple average of relative
price for 1992
Item Unit Price of one unit (Tsh)
1978 1987 1992
Butter 1 kg 1.86 3.60 13.24
Sugar 6 kg 1.89 4.74 5.25
sausages 5 kg 5.45 13.25 15.75
rice 250 kg 0.17 0.23 0.27
tea 500 g 1.64 2.86 3.48

Give an interpretation of the value found for the average of relative price

Question 5
The average retail price in Brisbane of one dozen 55 gram eggs, 500 grams of butter and one 680
gram loaf of white, sliced bread are shown in Table below for each of the year 1982, 1986 and
1992. Also shown are the quantities of each item sold in 1982.

Item Unit Quantity sold Price ($)

in 1982 1982 1986 1992
Potatoes 55 g 37 1.54 1.83 1.98
rice 500 g 28.5 1.38 1.62 1.62
margarine 680 g 82.0 0.76 0.95 1.28

a) Use 1982 as the base year, find the Laspeyres index for
i) 1986
ii) 1992
b) Suppose for the data in Table above that the quantities of eggs, butter and bread sold in 1992
were 31.5 million, 24.0 million and 96.5 million units, respectively. Find the Paasche index
for 1992 using 1982 as the base year
c) Calculate Fisher’s ideal index for 1992 where the base year is 1986, using the above data.