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Applied Mathematics · Ch 8 — Index Numbers and Time-based Data

Weighted Average of Relatives

8.4.9

Weighted Average of Relatives

The weighted average of relatives method combines two ideas seen earlier in this chapter — price relatives and weighting — into a single index. Instead of weighting raw prices, it weights each commodity's price relative R=pnp0×100R = \dfrac{p_n}{p_0}\times 100 by its value in the base period, p0Q0p_0 Q_0:

In=∑(p0Q0) R∑p0Q0I_n = \dfrac{\sum (p_0 Q_0)\, R}{\sum p_0 Q_0} …

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← Previous · 8.4.8Marshall-Edgeworth's MethodNext · 8.4.9 →Example 7 — Calculate the price index using weighted average of relatives method f…