Paasche Index

Where Laspeyres' Index freezes the weights at the base year, the Paasche Index — proposed by German statistician Hermann Paasche in 1874 — instead uses current-period quantities as weights, revising the basket to reflect what is actually being consumed today:

Here $Q_n$ is the quantity of usage in the current period $n$, while $p_0$ and $p_n$ remain the unit prices in the base and current periods respectively. Because it reflects present-day usage, the Paasche Index is often seen as more realistic for the current situation — but it comes at a cost: it may underestimate the true rise in the cost of living, and since it needs a fresh set of quantity weights every period, …