Q.__________ price index number satisfies both the Time Reversal and Factor Reversal test.

Because commodities differ hugely in how much of them people actually buy, a proper price index weights each commodity by its quantity rather than treating every commodity equally. Laspeyres' Price Index ($P_{01}^{L}=\sum p_1q_0/\sum p_0q_0 \times 100$) fixes the weights at base-year quantities, while Paasche's Price Index ($P_{01}^{P}=\sum p_1q_1/\sum p_0q_1 \times 100$) uses current-year quantities instead. The choice matters: Laspeyres tends to overstate a genuine cost-of-living rise because it never lets the basket adjust for consumers subs …