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Q.
product M uses four different types of materials. The materials used and their prices, in 2006 and 2007 , are as follows.
2006:
material A :200 kg 0.98 $per kg
material B: 500 kg 0.95 $per kg
material C: 300 kg 1.20 $per kg
material D: 400 kg 1.10 $ per kg
2007:
material A :300 kg 1.40 $per kg
material B: 400 kg 1.10 $per kg
material C: 500 kg 0.92 $per kg
material D: 100 kg 1.14 $ per kg
calculate the Lyspere quantity index for 2007 (with 2006 as the base year ) to two decimal places.
The answer is:
Lyspere method = 100* (1384/1471) =94.09.
So,why we don’t use base year quantities to calculate prices for year 2007?
The question asks for the quantity index, not for the price index.
Therefore you compare 2006 quantities at 2006 prices, with 2007 quantities at 2006 prices.