1.

Why is Fisher’s index number called an ideal number?

Answer»

The Fisher’s index number is called an ideal index number due to the following reasons:

  • Fisher’s index number considers and quantities of both the years, base year and current year in the construction of the index number.
  • It satisfies both the important fundamental tests, time reversal and factor reversal tests, of index number.
  • The geometric mean is used to calculate this index number which is the best average for the construction of index number.
  • It balances the demerits of Laspeyre’s and Paasche’s index numbers.


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