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Worked Examples · Example 3
Q.

For the data below, compute (a) Laspeyre's and (b) Paasche's price index numbers.

Commodityp0p_0q0q_0p1p_1q1q_1
A86125
B105126
C78810
D4455
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Both indices come from the same table of the four products:

Commodityp0p_0q0q_0p1p_1q1q_1p0q0p_0q_0p1q0p_1q_0p0q1p_0q_1p1q1p_1q_1
A8612548724060
B10512650606072
C7881056647080
D445516202025
Total170216190237
  1. Laspeyre's index (base-year quantities q0q_0 as weights):

    P01L=∑p1q0∑p0q0×100=216170×100=1.27059×100=127.06.P_{01}^{L} = \frac{\sum p_1 q_0}{\sum p_0 q_0}\times100 = \frac{216}{170}\times100 = 1.27059\times100 = 127.06.

  2. Paasche's index (current-year quantities q1q_1 as weights):

    P01P=∑p1q1∑p0q1×100=237190×100=1.24737×100=124.74.P_{01}^{P} = \frac{\sum p_1 q_1}{\sum p_0 q_1}\times100 = \frac{237}{190}\times100 = 1.24737\times100 = 124.74.

    Independent check. Column sums re-added: p0q0:48+50+56+16=170p_0q_0: 48+50+56+16=170; p1q0:72+60+64+20=216p_1q_0: 72+60+64+20=216; p0q1:40+60+70+20=190p_0q_1: 40+60+70+20=190; p1q1:60+72+80+25=237p_1q_1: 60+72+80+25=237. All four confirm, and 216/170=1.2706216/170=1.2706, 237/190=1.2474237/190=1.2474 as stated.
    ✓Final answer

    P01L≈127.06P_{01}^{L} \approx 127.06; P01P≈124.74P_{01}^{P} \approx 124.74.

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