Assuming the base period for 2010 consumption is November and the initial price index is set at 100, then the inflation rate after calculating the December price index as a Laspeyres index is closest to: A. 19.2%. B. 36.4%. C. 61.6%.
The Laspeyres index is calculated with these inputs: • November consumption bundle: 70 x 0.9 + 60 x 0.6 = 99 • December consumption bundle: 70 x 1 + 60 x 0.8 = 118 • December price index: (118/99) x 100 = 119.19 • inflation rate: (119.19/100) - 1 = 0.1919 = 19.19%
