Question

The following two tables represent the price and quantity of the goods produced within an economy in 2015 & 2016.

Calculate the expenditure weights for each good using 2015 as the base year. What weight should be placed on soda in the aggregate expenditure index? (round to two decimal places)

	Prices		Quantities
	2015	2016	2015	2016
Soda	$2	$2	36	40
Burgers	$8	$12	8	10
French Fries	$2	$1	16	20

Answer 1

If 2015 is the base year, the weight on soda in the aggregate expenditure index should equal the soda expenditure as a percentage of total expenditure (2x36) Weight on soda- x100% (2x36) + (8x8) + (2x16) _12 100% 168 = 42.85% Therefore, the weight to be on soda is 42.85%, ie. 0.4285, i.e. 0.43.