answer quetion 2

2. (121+121) Construct and interpret the Paasche and Laspeyres indices for 2010 costs using the above data (in Q1). Use 2005 as the base year and assume that both in 2005 and 2010, 60\% of the cost of a house was in materials and 40% of the cost of a house was labour. Hints: Use the percentage as weight for quantity (Q). For example, for Paasche Index numerator: Q,Pt=0.60 (Material costs in 2010) +0.40 (Labour costs in 2010) where: Qt=Weightingpercentagein2010Pt=Costsin2010 Material cost is given, but you need to compute the labour cost. Costs of labour and materials of homes construction