Questions: - The Arapaho Valley Pediatrics Clinic has been in business for 18 years. The office manager noticed that prices of clinic materials and office suppliers fluctuate over time. To get a handle on the price trends for running the clinic, the office manager examined prices of six items the clinic uses as part of its operations. Shown here are the items, their prices, and the quantities for the years 2005 and 2006. Use these data to develop unweighted aggregate price indexes for 2006 with a base year of 2005. Compute the Laspeyres price index for the year 2006 using 2005 as the base year. Compute the Paasche index number for 2006 using 2005 as the base year.

                       __________________ 2005 ____________               2006   
Item               ______________ Price        Quantity    ______ Price        Quantity
Syringes (dozen)       __________6.70__        150        _______6.95__        135
Cotton swabs (box)        ________1.35 __       60 _______       1.45___        65
Patient record forms (pad)_____   5.10___        8_______        6.25___        12
Children’s Tylenol (bottle)_____    4.50__        25_______        4.95 ___       30
Computer paper (box)        _____11.95____      6 ______       13.20 ____       8
Thermometers __________           7.90 ___       4 _______       9.00 ____       2
Totals                _______________37.50  __________              41.80

Unweighted Aggregate Index for 2006:
        I2006 = ∑P2006 (100) = 41.80(100) = 111.5
           ____ ∑P2005         ___37.50

Laspeyres Index for 2006:

∑P2006 Q2005    = [(6.95)(150) + (1.45)(60) + (6.25)(8) + (4.95)(25) + (13.20)(6) + (9.00)(4)]
        = 1,042.50 + 87.00 + 50.00 + 123.75 + 79.20 + 36.00
        = 1,148.45

∑P2006 Q2005     = [(6.70)(150) + (1.35)(60) + (5.10)(8) + (4.50)(25) (11.95)(6) + (7.90)(4)]
        = 1,005.00 + 81.00 + 40.80 + 112.50 + 71.70 + 31.60
        = 1, 342.6

I2006    = ∑P2006 Q2005 (100) = 1418.45(100) = 105.6
            ___∑P2005 Q2005           __1,342.6

Passache Index for 2006:


∑P2006 Q2006     = [(6.95)(135) + (1.45)(65) + (6.25)(12) + (4.95)(30) + (13.20)(8) + (9.00)(2)]
        = 938.25 + 94.25 + 75.00 + 148.50 + 105.60 + 18.00
        = 1,379.60

∑P2005 Q2006     = [(6.70)(135) + (1.35)(65) + (5.10)(12) + (4.50)(30) + (11.95)(8) + (7.90)(2)]
        = 904.50 + 87.75 + 61.20 + 135.00 + 95.60 + 15.80
        = 1,299.85

I2006    = ∑P2006 Q2006 (100) = 1,379.60(100) = 106.1
            __∑P2005 Q2006          ___1,299.85