Prices, location and spread
Prices, location and spread

Start this free course now. Just create an account and sign in. Enrol and complete the course for a free statement of participation or digital badge if available.

Free course

Prices, location and spread

Exercise on Section 4

The following exercise provides extra practice on the Section 4 material.

Exercise 9 Gradgrind’s energy price index for 2011

Use the data in Table 11, and the fact that Gradgrind’s energy price index for 2010 was 117.4 (as found in Activity 18), to calculate the value of Gradgrind’s energy price index for 2011.

Table 11 Gradgrind’s energy prices and expenditures for 2010 and 2011

Energy type: price and expenditure20102011

Gas price (£/MWh)

28

30

Gas expenditure (£)

23 969

24 282

Electricity price (£/MWh)

88

86

Electricity expenditure (£)

2 920

3 117

Discussion

The gas price ratio for 2011 relative to 2010 is

fraction 30 over 28 end simeq 1.071.

The electricity price ratio for 2011 relative to 2010 is

fraction 86 over 88 end simeq 0.977.

The overall energy price ratio for 2011 relative to 2010 is

fraction open bracket 1 .071 times 23969 close bracket + open bracket 0 .977 times 2920 close bracket over 23969 +2920 end = fraction 28523 .639 over 26889 end simeq 1.061.

Then the value of the index for 2011 is found by multiplying the 2010 value of the index by this overall price ratio, giving

117.4 times 1.061 simeq 124.6.
M140_1

Take your learning further

Making the decision to study can be a big step, which is why you'll want a trusted University. The Open University has 50 years’ experience delivering flexible learning and 170,000 students are studying with us right now. Take a look at all Open University courses.

If you are new to University-level study, we offer two introductory routes to our qualifications. You could either choose to start with an Access module, or a module which allows you to count your previous learning towards an Open University qualification. Read our guide on Where to take your learning next for more information.

Not ready for formal University study? Then browse over 1000 free courses on OpenLearn and sign up to our newsletter to hear about new free courses as they are released.

Every year, thousands of students decide to study with The Open University. With over 120 qualifications, we’ve got the right course for you.

Request an Open University prospectus371