Question 14.10: Paint and Painting Accessories Study (1) Calculate and inter......
Paint and Painting Accessories Study (1)
Calculate and interpret the link relative (i.e. year-on-year average price changes) for a basket consisting of paint and painting accessories (brushes, cleansing agents, sandpaper, etc.) from 2005 to 2011, using the composite price indexes given in Table 14.16.
(See Excel file C14.7 – paint prices.)
Table 14.16 Paint and painting accessories composite price index series (base = 2008)
| Year | 2005 | 2006 | 2007 | 2008 | 2009 | 2010 | 2011 |
| Composite price index | 79 | 88 | 91 | 100 | 114 | 138 | 151 |
Table 14.17 shows the link relatives for the above composite price index series for a basket of paint and paint accessories (using Formula 14.19).
To illustrate, the link relative for 2007 = \frac{91}{88} × 100 = 103.4 (using Formula 14.19).
Management Interpretation
The year-on-year average price increases in paint and painting accessories have been 11.4% (2006); 3.4% (2007); 9.9% (2008), etc. The largest annual average percentage increase has been 21.1% from 2009 to 2010, while the smallest annual average percentage increase was 3.4% from 2006 to 2007.
Table 14.17 Link relatives – paint and painting accessories composite price index series
| Year | 2005 | 2006 | 2007 | 2008 | 2009 | 2010 | 2011 |
| Composite price index | 79 | 88 | 91 | 100 | 114 | 138 | 151 |
| Link relative | — | 111.4 | 103.4 | 109.9 | 114 | 121.1 | 109.4 |