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Explain Paasche’s price index number. |
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Answer» If both prices and quantities were permitted to change, then it is impossible to isolate the part of movement due to price changes alone. In this case, the current year quantities appear more realistic weights than the base year quantities. The index number based on current year quantities is called Paasche’s price index number. \(P^P_{01} = \frac {\sum p_1q_0} {\sum p_0q_0}\times100\) Where p1 is the current year price q1 is the current year quantity p0 is the base year price |
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