• Re: ECO402 Assignment 1 Solution and Discussion
    DUE DATE: 10
    TH DECEMBER, 2020
    MARKS: 15
    The Case:
    Breakfast is often called ‘the most important meal of the day’. As the name
    suggests, breakfast breaks the overnight fasting period. It replenishes your
    supply of glucose to boost your energy levels and alertness. It also helps
    to provide other essential nutrients required for good health. Breakfast can
    help to better weight management, reduce risk of type 2 diabetes, and heart
    disease in the long term. Milk, eggs, and tea are commonly used in
    breakfast in Pakistan. Therefore, changes in the prices of these products
    have a major impact on the cost of living. The information about their
    nominal prices and CPI from 2018 to 2020 is giver below:
    Item Unit Year Nominal Price CPI
    Milk Liter
    Jun -2018 85.00 283.97
    Jun -2019 90.00 296.50
    Jun -2020 97.50 322.10
    Eggs Dozen
    Jun -2018 83.13 182.83
    Jun -2019 79.38 172.61
    Jun -2020 115.63 229.01
    Tea Packet
    Jun -2018 205.26 304.69
    Jun -2019 221.05 322.11
    Jun -2020 242.10 350.92
    Keeping in mind the above scenario, solve the following questions.
    a. By assuming June-2018 as the base year, find the real price of milk,
    eggs, and tea in each year.
    b. If the base year bundle has 10 liter milk, 3 dozen eggs, and 2 packets
    of tea then find the Laspeyres index by assuming June-2018 as the
    base year and June-2020 as the current year.
    Marks: (9+6)

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