Book cover for Statistics for Business and Economics

Statistics for Business and Economics

David R. Anderson, Dennis J. Sweeney, Thomas A. Williams

ISBN #9780324365054

10th Edition

999 Questions

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39,032 Students Helped

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Summary
Learning Objectives
Key Concepts
Example Problems
Explanations
Common Mistakes

Summary

This section provided an in?depth exploration of index numbers, detailing how both individual price relatives and aggregate price indexes are constructed using unweighted and weighted methods. Key economic indicators such as the Consumer Price Index, Producer Price Index, and Dow Jones Industrial Average were discussed, illustrating how these measures track inflation and economic activity over time. Additionally, practical applications such as deflating economic series to determine real values were examined, alongside important considerations like base period selection and quality adjustments.

Learning Objectives

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Key Concepts

CONCEPT

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Example Problems

Example 1

The following table reports prices and usage quantities for two items in 2004 and 2006 a. Compute price relatives for each item in 2006 using 2004 as the base period. b. Compute an unweighted aggregate price index for the two items in 2006 using 2004 as the base period. c. Compute a weighted aggregate price index for the two items using the Laspeyres method. d. Compute a weighted aggregate price index for the two items using the Paasche method.

Example 2

An item with a price relative of $132 \operatorname{cost} \$ 10.75$ in $2006 .$ Its base year was 1992 a. What was the percentage increase or decrease in cost of the item over the 14 -year period? b. What did the item cost in $1992 ?$

Example 3

A large manufacturer purchases an identical component from three independent suppliers that differ in unit price and quantity supplied. The relevant data for 2004 and 2006 are given here. a. Compute the price relatives for each of the component suppliers separately. Compare the price increases by the suppliers over the two-year period. b. Compute an unweighted aggregate price index for the component part in 2006 c. Compute a 2006 weighted aggregate price index for the component part. What is the interpretation of this index for the manufacturing firm?

Example 4

R\&B Beverages, Inc., provides a complete line of beer, wine, and soft drink products for distribution through retail outlets in central Iowa. Unit price data for 2003 and 2006 and quantities sold in cases for 2003 follow. Compute a weighted aggregate index for the $R \& B$ Beverage sales in $2006,$ with 2003 as the base period.

Example 5

Under the LIFO inventory valuation method, a price index for inventory must be established for tax purposes. The quantity weights are based on year-ending inventory levels. Use the beginning-of-the-year price per unit as the base-period price and develop a weighted aggregate index for the total inventory value at the end of the year. What type of weighted aggregate price index must be developed for the LIFO inventory valuation?
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Step-by-Step Explanations

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Common Mistakes

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