Fisherpriceindex=(LaspeyeresPriceIndex×PaaschePriceIndex)0.5
LPI=Σ(Pi,o)×(Qi,o)Σ(Pi,t) times(Qi,o)
=(40×4)+(15×6)+(10×6)+(20×10)+(30×12)+(40×10)(12×5)+(18×10)+(10×10)+(22×20)+(40×18)+(50×12)
=11502100=182.61
PaaschePriceIndex=(ΣP0,t) times(Qi,t)Σ(Pi,t)×Qi,t)
=(10×5)+(15×10)+(10×10)+20×20)+(30×18)+(40×12)(12×5)+(18×10)+(10×10)+(22×20)+(40×18)+(50×12)
=18202100=115.38
FishersPriceIndex=(115.38×182.61)0.5FishersPriceIndex=(115.38×182.61)0.5=145.15
This shows inflation has gone up by 45.15% and therefore means prices are not affordable with the same amount as in the previous year.
Kelly's Price Index=ΣP0qΣPiq
q=2(Q0+Q1)
Maize, q= 2(4+5)=4.5
Vegetables,q=2(6+10)=8
Peas,q=2(6+10)=8
Beans,q=2(10+20)=15
Wheat,q=2(12+18)=15
Millet,q=2(10+12)=11
Kelly's Price Index= (10×4.5)+(15×8)+(10×8)+(20×15)+(30×15)+(40×11)(12×4.5)+(18×8)+(10×8)+(22×15)+(40×4.5)+(50×11)×100
=15351858×100=121.04 %
This shows that there is an inflation of 21.04%.
There is therefore the need to request for more funds from the government to cater for the increased prices and be able to meet the budget.
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