Economics Statistics

Question 6 Index numbem [12 marks} The tourist industry is very much interested in understanding how tourists spend money. In order to measure the price changes in three important components of tourist spending. a statistician calculated the average cost of a hotel room per night, the cost of one meal, and the cost of car rental per day. The results of this are shown below. Tourist spending 985 201 1 Component oost Quantit cost {5) (ii) I Quantity Hotel (one night) 55 6 220 4 Meal 1 0 3 26 6 Car rental (one day) 25 2 70 3 a) Calculate a simple price index of a carrental per day. taking 1985 as the base year. Interpret your answer. (2 marks) b) Calculate the simple aggregate price index of tourist spending per day1 taking 1935 as a base year. (2 marks} c) Calculate the Laspeyres (LPI), Passche (PPI) and Fisher price index {FPI}. Let 1935 =100. (6 marks) d) Discuss one disadvantage of a simple aggregate price index. (2 marks)