The following historical data describe monthly purchase by an average farm family: Commodity 2002 2012 Price Qty Price Qty Milk (L) \$1.30 30 \$1.40 30…

The following historical data describe monthly purchase by an average farm family:

Commodity              2002                          2012

Price    Qty               Price       Qty

Milk (L)                 \$1.30      30              \$1.40        30

Butter (kg)           \$2.00       3               \$2.75         2

Eggs (dozen)       \$1.60       8               \$2.00         4

Sugar (kg)            \$1.70      14             \$2.40        10

a) Compute the Laspeyres price index, using 2002 as the base year.

My Answer for a) P= ΣPnQ0/ΣP0Q0(100) 99.65/81.60(100) = 122.13

b) Assume that your index, calculated in (a), applied in general for all foods. Suppose a certain family spent \$1500 in 2002 and \$2500 in 2012. In which of the two years would the family have had more to eat for their money? Show your rational.

(No idea how to answer b)