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To solve this problem using 2004 as the base year, we need to compute:

1. **Laspeyres' Price Index** and
2. **Paasche's Price Index.**

Here's a brief description of the formulas:

- **Laspeyres' Price Index (LPI):** This index measures price changes, keeping quantities constant at the base year level. The formula is:

  \[
  LPI = \frac{\sum (P_1 \cdot Q_0)}{\sum (P_0 \cdot Q_0)} \times 100
  \]
  Where:
  - \( P_1 \) = Prices in the current year (2005),
  - \( P_0 \) = Prices in the base year (2004),
  - \( Q_0 \) = Quantities in the base year (2004).

- **Paasche's Price Index (PPI):** This index measures price changes, but it keeps the quantities constant at the current year level. The formula is:

  \[
  PPI = \frac{\sum (P_1 \cdot Q_1)}{\sum (P_0 \cdot Q_1)} \times 100
  \]
  Where:
  - \( P_1 \) = Prices in the current year (2005),
  - \( P_0 \) = Prices in the base year (2004),
  - \( Q_1 \) = Quantities in the current year (2005).

### Data from the table:

For 2004:
- **Gulder**: \( P_0 = 120 \), \( Q_0 = 50 \)
- **Star**: \( P_0 = 100 \), \( Q_0 = 80 \)
- **Malt**: \( P_0 = 60 \), \( Q_0 = 70 \)

For 2005:
- **Gulder**: \( P_1 = 130 \), \( Q_1 = 70 \)
- **Star**: \( P_1 = 90 \), \( Q_1 = 90 \)
- **Malt**: \( P_1 = 70 \), \( Q_1 = 80 \)

Let's compute both indices.The computed indices are:

1. **Laspeyres' Price Index**: 102.20
2. **Paasche's Price Index**: 102.70

This indicates that prices have increased by approximately 2.2% to 2.7% from 2004 to 2005, depending on the index used.

Would you like further details or have any questions?

Here are 5 related questions for deeper understanding:
1. How do Laspeyres' and Paasche's indices differ in terms of calculation and purpose?
2. What are the advantages and disadvantages of using Laspeyres' Price Index?
3. Why do Paasche and Laspeyres indices often give slightly different values?
4. Can these indices be used to calculate inflation? If so, how?
5. What are other types of price indices used in economics?

**Tip:** Laspeyres' index tends to overestimate inflation, while Paasche's index can underestimate it. This is due to the difference in how they treat quantities in the base and current years.

Compute Laspeyres' Price Index and Paasche's Price Index using 2004 as the base year for the data given (Nigerian Breweries PLC sales data for 2004 and 2005).

Learn how to compute Laspeyres' and Paasche's Price Indices using 2004 as the base year, with data from Nigerian Breweries PLC for 2004 and 2005. This problem uses key economic formulas to analyze price changes over time.

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