Question

(a)Construct an annual ‘coffee price index’ for this time period using 2005 as the

base year. [Hint: follow the procedure detailed in the chapter – divide each yearly

price by the base year price.]

Answer 1

Year Average closing Price Annual % change

2005 1.0811

2021 2.6933 149.13 (2.6933-1.0811/1.0811x100)

2022 2.3863 120.73 (2.3863-1.0811)/1.0811x100)

When using 2005 as the base year, the coffee prices have to be subtracted from the 2005 coffee price then divided by the base year coffee price. In this scenario, the 2021 annual change is obtained by; (2.3863-1.0811)/1.0811x100=120.73.