In 1933, the Swedish economist Gunnar Myrdal (who later won a Nobel prize in economics) and a

Question:

In 1933, the Swedish economist Gunnar Myrdal (who later won a Nobel prize in economics) and a group of his associates at Stockholm University collected a fantastically detailed historical series of prices and price indexes in Sweden from 1830 until 1930. This was published in a book called The Cost of Living in Sweden. In this book you can find 100 years of prices for goods such as oat groats, hard rye bread, salted codfish, beef, reindeer meat, birchwood, tallow candles, eggs, sugar, and coffee. There are also estimates of the quantities of each good consumed by an average working-class family in 1850 and again in 1890. The table below gives prices in 1830, 1850, 1890, and 1913, for flour, meat, milk, and potatoes. In this time period, these four staple foods accounted for about 2/3 of the Swedish food budget.
Prices of Staple Foods in Sweden
Prices are in Swedish kronor per kilogram, except for milk, which is in
Swedish kronor per liter.

Based on the tables published in Myrdal€™s book, typical consumption bundles for a working-class Swedish family in 1850 and 1890 are listed below. (The reader should be warned that we have made some approximations and simplifications to draw these simple tables from the much more detailed information in the original study.)
Quantities Consumed by a Typical Swedish Family
Quantities are measured in kilograms per year, except for milk, which is measured in liters per year.

(a) Complete the table below, which reports the annual cost of the 1850 and 1890 bundles of staple foods at various years€™ prices.
(b) Is the 1890 bundle revealed preferred to the 1850 bundle?
(c) The Laspeyres quantity index for 1890 with base year 1850 is the ratio of the value of the 1890 bundle at 1850 prices to the value of the 1850 bundle at 1850 prices. Calculate the Laspeyres quantity index of staple food consumption for 1890 with base year 1850.
(d) The Paasche quantity index for 1890 with base year 1850 is the ratio of the value of the 1890 bundle at 1890 prices to the value of the 1850 bundle at 1890 prices. Calculate the Paasche quantity index for 1890 with base year 1850.
(e) The Laspeyres price index for 1890 with base year 1850 is calculated using 1850 quantities for weights. Calculate the Laspeyres price index for 1890 with base year 1850 for this group of four staple foods.
(f ) If a Swede were rich enough in 1850 to afford the 1890 bundle of staple foods in 1850, he would have to spend _____times as much on these foods as does the typical Swedish worker of 1850.
(g) If a Swede in 1890 decided to purchase the same bundle of food staples that was consumed by typical 1850 workers, he would spend the fraction ____ of the amount that the typical Swedish worker of 1890 spends on these goods.