Fisher's Ideal Index is called "ideal" mainly because it: (a) always gives the smallest possible index value (b) is the easiest formula to calculate (c) satisfies both the Time Reversal Test and the Factor Reversal Test (d) uses only base-year quantities as weights

Checking each option against Section 5's definitions: - **(a) Smallest possible value** — false; Fisher's index (a geometric mean of L and P) always lies BETWEEN Laspeyres and Paasche, never automatically the smallest of all possible formulae. - **(b) Easiest to calculate** — false; Fisher's index requires computing BOTH Laspeyres and Paasche first and then a square root, making it more laborious than either alone, not simpler. - **(c) Satisfies both the Time Reversal Test ($P_{01}\times P_{10}=1$) and the Factor Reversal Test ($P_{01}\times Q_{01}=V_{01}$)** — TRUE, and verified numerically in Example 9 above for the Factor Reversal Test specifically; this dual property is the actual, examinable reason for the name "ideal". …

Fisher's Ideal Index is called "ideal" mainly because it: (a) always gives the smallest possible index value (

Worked Examples · Example 11

Q. Fisher's Ideal Index is called "ideal" mainly because it:

(a) always gives the smallest possible index value

(b) is the easiest formula to calculate

(d) uses only base-year quantities as weights

Maharashtra MsbshseTextbookSubjectiveImportance★★★★★est

40% · 14/35 Questions

🔒 Locked · start free trial →

You're viewing a preview — the full solution, concept, methods & PYQ mapping are locked.

Start your 14-day free trial to unlock the full solution →

Checking each option against Section 5's definitions:

(a) Smallest possible value — false; Fisher's index (a geometric mean of L and P) always lies BETWEEN Laspeyres and Paasche, never automatically the smallest of all possible formulae.
(b) Easiest to calculate — false; Fisher's index requires computing BOTH Laspeyres and Paasche first and then a square root, making it more laborious than either alone, not simpler.
(c) Satisfies both the Time Reversal Test ( $P_{01}\times P_{10}=1$ ) and the Factor Reversal Test ( $P_{01}\times Q_{01}=V_{01}$ ) — TRUE, and verified numerically in Example 9 above for the Factor Reversal Test specifically; this dual property is the actual, examinable reason for the name "ideal". …

Start your 14-day free trial to unlock the full solution →

←Previous questionExample 10 — A worker's family budget enquiry gives the following group weights and…→Next chapterCh 8National Income

Q.Fisher's Ideal Index is called "ideal" mainly because it:

Concept understanding — Weighted Methods of Price Index Construction and Tests of Adequacy

Q.Fisher's Ideal Index is called "ideal" mainly because it:

🎓Unlock everything free for 14 days

Unlock everything free for 14 days