Applied Mathematics · Ch 8 — Index Numbers and Time-based Data
Weighted Aggregative Method
8.4.4
Weighted Aggregative Method
The simple methods above treat every commodity as equally significant, which rarely reflects reality — a household spends far more on staple food than on stationery, for example. The weighted aggregative method corrects this by attaching a weight (typically the quantity consumed or sold, ) to each commodity's price before aggregating, so items of greater economic importance influence the index more strongly.
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