INDEX NUMBERS Taking 1980 as the base year, compute the simple index for the pri
ID: 2420381 • Letter: I
Question
INDEX NUMBERS
Taking 1980 as the base year, compute the simple index for the price of natural gas in 1967, 1975, 1985, and 1995, 2005, and 2014 using the data in the table below:
U.S. Price of Natural Gas Sold to Commercial Consumers (Dollars per Thousand Cubic Feet)
Decade
Year-0
Year-1
Year-2
Year-3
Year-4
Year-5
Year-6
Year-7
Year-8
Year-9
1960's
0.74
0.73
0.74
1970's
0.77
0.82
0.88
0.94
1.07
1.35
1.64
2.04
2.23
2.73
1980's
3.39
4.00
4.82
5.59
5.55
5.50
5.08
4.77
4.63
4.74
1990's
4.83
4.81
4.88
5.22
5.44
5.05
5.40
5.80
5.48
5.33
2000's
6.59
8.43
6.63
8.40
9.43
11.34
12.00
11.34
12.23
10.06
2010's
9.47
8.91
8.10
8.08
8.90
U.S. Price of Natural Gas Sold to Commercial Consumers (Dollars per Thousand Cubic Feet)
Explanation / Answer
Taking base year as 1980, the index will be 100 for such year.
Now using the formula; Price in 1967 = Index for 1967
Price in 1980 100
Putting the values for each year in the above formula;
Year 1967: 0.74 / 3.39= Index for 1967 / 100
Index for 1967 is 21.8289
Year 1975: 1.35/ 3.39 = Index for 1975 / 100
Index for 1975 is 39.8230
Year 1985: 5.50 / 3.39 = Index for 1985 / 100
Index for 1985 is 162.2418
Year 1995: 5.05 / 3.39 = Index for 1995 / 100
Index for 1995 is 148.9675
Year 2005 : 11.34 / 3.39 = Index for 2005 / 100
Index for 2005 is 334. 5132
Year 2014: 8.90/ 3.39 = Index for 2014 / 100
Index for 2014 is 262.5368