Roberto is a senior citizen who consumes food and healthcare

Roberto is a senior citizen who consumes food and healthcare. When he retired in 2002, he consumed 90 meals and 3 medical checkups per month. Suppose in 2002 that the price of a meal was $10 and the price of a medical checkup was $64. However, in 2012, the price of a meal is $11 and the price of a medical checkup is $277. As a result, Roberto consumes 100 meals and 2 medical checkups per month.

Calculate a Laspeyres cost-of-living index for Roberto using 100 as the base in 2002. In particular, the Laspeyres index for 2012 is ___. (Enter you response to two decimal places.)

The Laspeyres index suggests inflation has been ___% over the 10-year period from 2002 to 2012. (Enter your response to two decimal places.)

Next, calculate a Paasche cost-of-living index for Roberto using 100 as the base in 2002. In particular, the Paasche index for 2012 is ___. (Enter your response to two decimal places.)

The Paasche index suggests inflation has been ___%. (Enter your response to two decimal places.)

Solution

Calculate a Laspeyres cost-of-living index for Roberto using 100 as the base in 2002. In particular, the Laspeyres index for 2012 is 1.6675. (Enter you response to two decimal places.).

The Laspeyres index suggests inflation has been 66.75% over the 10-year period from 2002 to 2012. (Enter your response to two decimal places.)

Calculate a Laspeyres cost-of-living index for Roberto using 100 as the base in 2002. In particular, the Laspeyres index for 2012 is 1.4631 (Enter you response to two decimal places.).

The Paasche index suggests inflation has been 46.31%. (Enter your response to two decimal places.).

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