Assignment 1

1. Compute price index and quantity index numbers for the year 2005 with 2000 as a base
year, using (i) Laspeyre’s Method (ii) Paasche’s Method and (ii) Fisher’s Method.

Commodity Quantity (Units) Expenditure (Rs.)

2000 2005 2000 2005
A 100 150 500 900
B 80 100 320 500
C 60 72 150 360
D 30 33 360 297

2. The table 1 gives the average wholesale prices of four groups of commodities for the year
2001 to 2005. Compute chain base index numbers.

Commodity 2001 2002 2003 2004 2005

A 20 30 40 20 70
B 30 60 90 40 30
C 40 120 200 80 160
D 50 70 180 110 220
(table: 1)
3. “Index Number are economic barometers.” Elucidate.
4. Discuss the importance and limitations of the index numbers.
5. Describe the demand and supply curves mentioning the uses and limitations of these
curves.
6. If the demand curve is of the form 𝑝 = 𝑎𝑒 −𝑘𝑥 , where 𝑝 is the price and 𝑥 is the demand,
1
prove that elasticity of demand is 𝑘𝑥. Hence deduce the elasticity of demand for the curve
−𝑥
𝑝 = 10𝑒 2 .
7. The price elasticity of a demand curve 𝑥 = 𝑓(𝑝) is of the form (𝑎 − 𝑏𝑝), where 𝑎 and 𝑏
are the given constants. Find the demand curve.
8. Explain Engel’s law and critically comment on it.
9. State Pareto’s law of income distribution and discuss its limitations.
10. Explain clearly what is meant by trend of a time-series. How is trend eliminated?