Compute Laspeyre's and Paasche's price index numbers for the following data.
| Commodity | p0 | q0 | p1 | q1 |
|---|---|---|---|---|
| A | 4 | 5 | 6 | 7 |
| B | 6 | 4 | 8 | 5 |
| C | 5 | 6 | 6 | 4 |
Concept understanding — Weighted Aggregate Index Numbers
Weighted aggregate price indices multiply each price by a quantity (weight) before totalling; they differ in which quantities they use. Laspeyre's uses base-year quantities, ∑p0q0∑p1q0×100; Paasche's uses current-year quantities, ∑p0q1∑p1q1×100; Dorbish–Bowley is their arithmetic mean; Fisher's ideal is their geometric mean, L×P, and satisfies the time- and factor-reversal tests; Marshall–Edgeworth uses (q0+q1) as weights, ∑p0(q0+q1)∑p1(q0+q1)×100. All five are built from the same four totals ∑p0q0,∑p1q0,∑p0q1,∑p1q1.
Tabulate the four value totals, then substitute.
∑p0q0=74, ∑p1q0=98, ∑p0q1=78, ∑p1q1=106.
Laspeyre =7498×100=132.43; Paasche =78106×100=135.90.
P01L≈132.43, P01P≈135.90.
Build the products table:
| Commodity | p0 | q0 | p1 | q1 | p0q0 | p1q0 | p0q1 | p1q1 |
|---|---|---|---|---|---|---|---|---|
| A | 4 | 5 | 6 | 7 | 20 | 30 | 28 | 42 |
| B | 6 | 4 | 8 | 5 | 24 | 32 | 30 | 40 |
| C | 5 | 6 | 6 | 4 | 30 | 36 | 20 | 24 |
| Total | 74 | 98 | 78 | 106 |
Laspeyre's index:
P01L=∑p0q0∑p1q0×100=7498×100=1.32432×100=132.43.
Paasche's index:
P01P=∑p0q1∑p1q1×100=78106×100=1.35897×100=135.90.
Independent check. p0q0:20+24+30=74; p1q0:30+32+36=98; p0q1:28+30+20=78; p1q1:42+40+24=106. All confirm.
P01L≈132.43; P01P≈135.90.
Mixing the weights — always q0 for Laspeyre, q1 for Paasche. Also mis-multiplying a row (e.g. p1q1 for A is 6×7=42, not 6×5).
- CBSE 2026Set ANNUAL1 markQ.If P01(L)=225, P01(P)=144 then P01(F) = ______.
›Reveal solutionSolution
Fisher's index is the geometric mean of Laspeyre's and Paasche's indices: P01(F)=P01(L)⋅P01(P)=180.
Fisher's ideal price index number is defined as the geometric mean of Laspeyre's index P01(L) and Paasche's index P01(P):
P01(F)=P01(L)×P01(P)
Substituting the given values P01(L)=225 and P01(P)=144:
P01(F)=225×144=32400
Since 225=15 and 144=12, we get 32400=15×12=180.
✓Final answerP01(F)=180.
- CBSE 2025Set ANNUAL1 markMCQQ.If P01(L)=90 and P01(P)=40, then P01(D−B) is ______.(a) 65(b) 50(c) 25(d) 130
›Reveal solutionSolution
Dorbish–Bowley's index is the arithmetic mean of Laspeyre's and Paasche's indices: P01(D−B)=2P01(L)+P01(P)=290+40=65.
Formula. The Dorbish–Bowley price index number is defined as the arithmetic mean of the Laspeyre's index P01(L) and the Paasche's index P01(P):
P01(D−B)=2P01(L)+P01(P).
Substitution. Given P01(L)=90 and P01(P)=40,
P01(D−B)=290+40=2130=65.
✓Final answerOption (A) 65.
- CBSE 2025Set ANNUAL1 markQ.Quantity Index Number by Weighted Aggregate Method is given by ______.
›Reveal solutionSolution
A weighted quantity index measures how total quantity has changed from the base year to the current year, giving each commodity a weight w. The formula is Q01=∑q0w∑q1w×100.
In the simple aggregate quantity index we would just add the quantities. But different commodities matter to different degrees, so we attach a weight w (commonly the price, or value) to each item.
For each commodity we form the weighted quantity of the current year, q1w, and of the base year, q0w. Summing over all commodities gives ∑q1w and ∑q0w.
The index expresses the current-year total as a percentage of the base-year total:
Q01=∑q0w∑q1w×100.
✓Final answerQuantity Index Number by the Weighted Aggregate Method =∑q0w∑q1w×100.
- CBSE 2024Set ANNUAL1 markMCQQ.Dorbish-Bowley’s Price Index Number is given by ______.(a) 2∑p0q1∑p1q0+∑p1q0∑p0q1×100(b) 2∑p0q0∑p1q1+∑p1q1∑p0q0×100(c) 2∑p0q0∑p1q0+∑p0q1∑p1q1×100(d) 2∑p1q0∑p0q0+∑p1q1∑p0q1×100
›Reveal solutionSolution
Dorbish–Bowley's index is the average of Laspeyre's and Paasche's indices: P01DB=21(∑p0q0∑p1q0+∑p0q1∑p1q1)×100 — option (c).
The two base index numbers are:
Laspeyre’s: P01L=∑p0q0∑p1q0×100(base-year quantity weights)
Paasche’s: P01P=∑p0q1∑p1q1×100(current-year quantity weights)
Dorbish–Bowley's price index number is defined as their arithmetic mean:
P01DB=2P01L+P01P=2∑p0q0∑p1q0+∑p0q1∑p1q1×100
Comparing with the options, this matches option (c). (Option (b) is the form of Fisher-type reciprocals, and options (a) and (d) use incorrect ratio pairings.)
✓Final answerDorbish–Bowley's price index number is 2∑p0q0∑p1q0+∑p0q1∑p1q1×100 — option (c).
- CBSE 2023Set ANNUAL1 markMCQQ.Quantity Index Number by Weighted Aggregate Method is given by ______.(a) ∑q0wq1w×100(b) ∑q1wq0w×100(c) ∑q0w∑q1w×100(d) ∑q1w∑q0w×100
›Reveal solutionSolution
The weighted aggregate quantity index number is the ratio of the aggregate of weighted current-year quantities to weighted base-year quantities, ∑q0w∑q1w×100. Hence option (C).
For a quantity index number by the weighted aggregate method, each quantity is multiplied by its weight w and the aggregates are compared, with the current year in the numerator and the base year in the denominator:
Q01=∑q0w∑q1w×100
Here q1 = current-year quantities, q0 = base-year quantities, and w = weights. The options that sum each ratio term separately, ∑q0wq1w, are wrong (that would be an average-of-relatives form, not the aggregate form), and putting q0 on top would reverse base and current years.
✓Final answerThe correct option is (C) ∑q0w∑q1w×100.
- CBSE 2023Set ANNUAL1 markMCQQ.Laspeyre’s Price Index Number uses current year’s quantities as weights.(a) True(b) False
›Reveal solutionSolution
Laspeyre's price index weights prices by base-year quantities, P01L=∑p0q0∑p1q0×100; current-year quantities are used by Paasche's index. Hence the statement is False.
The two weighted-aggregate price index numbers differ only in the choice of quantity weights:
Laspeyre: P01L=∑p0q0∑p1q0×100(base-year quantities q0 as weights)
Paasche: P01P=∑p0q1∑p1q1×100(current-year quantities q1 as weights)
Since Laspeyre's index fixes the weights at the base-year quantities q0 (not the current-year quantities q1), the claim in the statement is wrong.
✓Final answerThe statement is False.
- CBSE 2023Set ANNUAL1 markQ.Walsh’s Price Index Number is given by _______.
›Reveal solutionSolution
Walsh's price index uses the geometric mean of the two quantities as weight: P01=∑p0q0q1∑p1q0q1×100.
In a weighted aggregate index number, each item's price is weighted by a suitable quantity. Walsh's method takes the weight of each commodity as the geometric mean of the base-year quantity q0 and the current-year quantity q1, i.e. q0q1.
With p0,p1 the base-year and current-year prices, the current-year prices are aggregated (weighted by q0q1) and divided by the similarly weighted base-year prices:
P01=∑p0q0q1∑p1q0q1×100
Using the geometric mean of quantities makes Walsh's index a good compromise between Laspeyre's (q0 weights) and Paasche's (q1 weights) indices.
✓Final answerP01=∑p0q0q1∑p1q0q1×100
- CBSE 2022Set ANNUAL1 markMCQQ.Choose the correct alternative : The price Index Number by Weighted Aggregate Method is given by ______.(a) p0w∑p1w×100(b) p1w∑p0w×100(c) ∑p0w∑p1w×100(d) ∑p1w∑p0w×100
›Reveal solutionSolution
The weighted aggregate price index is the ratio of total weighted current-year prices to total weighted base-year prices, times 100.
Let p0 and p1 be the base-year and current-year prices and w the assigned weights. The Price Index Number by the Weighted Aggregate Method aggregates the weighted prices and compares the current year with the base year:
P01=∑p0w∑p1w×100.
The numerator and denominator must each be a sum over all commodities, which rules out the options without both summation signs; and the current year (p1) belongs in the numerator, which rules out the option with p0w on top.
✓Final answerThe index is ∑p0w∑p1w×100 — option (C).
- CBSE 2022Set ANNUAL1 markMCQQ.State whether the following statement is true or false: Dorbish-Bowley's Price Index Number is the square root of the product of Laspeyre's and Paasche's Index Numbers.(a) True(b) False
›Reveal solutionSolution
Dorbish-Bowley's index is the arithmetic mean of Laspeyre's and Paasche's; the geometric mean (square root of their product) is Fisher's index — so the statement is False.
Let L and P denote Laspeyre's and Paasche's price index numbers.
Dorbish-Bowley's Price Index Number is their arithmetic mean:
DB=2L+P.
Fisher's Ideal Price Index Number is their geometric mean:
Fisher=L⋅P.
The statement describes L⋅P, which is Fisher's index — not Dorbish-Bowley's. Hence the statement is incorrect.
✓Final answerThe statement is False — the square root of the product of L and P is Fisher's index; Dorbish-Bowley's is 2L+P.
- CBSE 2022Set ANNUAL1 markQ.If P01(L)=121, P01(P)=100, then P01(F)= ______.
›Reveal solutionSolution
Fisher's ideal price index is the geometric mean of the Laspeyres and Paasche indices, which gives P01(F)=110.
Fisher's ideal price index number is defined as the geometric mean of the Laspeyres index P01(L) and the Paasche index P01(P):
P01(F)=P01(L)×P01(P)
Substituting the given values P01(L)=121 and P01(P)=100:
P01(F)=121×100=12100=110
✓Final answerP01(F)=110
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