Question 14.8: Electrical Appliances Study Revise the base period of the pr......
Electrical Appliances Study
Revise the base period of the price index series shown in Table 14.13 from 2007 to 2009.
(See Excel file C14.5 – electrical appliances.)
Table 14.13 Electrical appliances price index series (base = 2007)
| Year | 2005 | 2006 | 2007 | 2008 | 2009 | 2010 | 2011 |
| Price index | 78 | 87 | 100 | 106 | 125 | 138 | 144 |
Calculate the adjustment factor:
\frac{100}{\text{Price index 2009}}=\frac{100}{125} = 0.80 (Formula 14.16)
Now multiply each price index in the series by the adjustment factor of 0.80.
2005: 78 × 0.8 = 62.4
2006: 87 × 0.8 = 69.6, etc.
This results in the following revised price index series, with 2009 as the new base year (Table 14.14).
In the revised price index series, price changes are now interpreted relative to 2009. For example, 2008 prices were 84.8% (or 15.2% below those) of 2009 prices, on average. In the previous price index series, 2008 and 2009 prices could not be compared directly.
Table 14.14 Re-based electrical appliances price index series (base = 2009)
| Year | 2005 | 2006 | 2007 | 2008 | 2009 | 2010 | 2011 |
| Price index | 62.4 | 69.6 | 80.0 | 84.8 | 100.0 | 110.4 | 115.2 |