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Question
Compute (i) Laspeyre’s (ii) Paasche’s (iii) Fisher’s Index numbers for the 2010 from the following data.
| Commodity | Price | Quantity | ||
| 2000 | 2010 | 2000 | 2010 | |
| A | 12 | 14 | 18 | 16 |
| B | 15 | 16 | 20 | 15 |
| C | 14 | 15 | 24 | 20 |
| D | 12 | 12 | 29 | 23 |
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Solution
| Commodity | 2000 (Base year) |
2010 (Current year) |
p0q0 | p0q1 | p1q0 | p1q1 | ||
| p0 | q0 | p1 | q1 | |||||
| A | 12 | 14 | 18 | 16 | 216 | 192 | 252 | 224 |
| B | 15 | 16 | 20 | 15 | 300 | 225 | 320 | 240 |
| C | 14 | 15 | 24 | 20 | 336 | 280 | 360 | 300 |
| D | 12 | 12 | 29 | 23 | 348 | 276 | 348 | 276 |
| Total | `sum"p"_0"q"_0` = 1200 | `sum"p"_0"q"_1` = 973 | `sum"p"_1"q"_0` = 1280 | `sum"p"_1"q"_1` = 1040 | ||||
(i) Laspeyre's Price Index
`"P"_01^"L" = (sum"p"_1"q"_0)/(sum"p"_0"q"_0) xx 100`
= `1280/1200 xx 100`
= 106.6
(ii) Paasche's Price Index
`"P"_01^"P" = (sum"P"_1"q"_1)/(sum"p"_0"q"_1) xx 100`
= `1040/973 xx 100`
= 106.8
(iii) Fisher’s price index number
`"P"_01^"F" = sqrt((sum"p"_1"q"_0)/(sum"p"_0"q"_0) xx (sum"p"_1"q"_1)/(sum"p"_0"q"_1)) xx 100`
= `sqrt(1280/1200 xx 1040/973) xx 100`
= `sqrt((13,31,200)/(11,67,600)) xx 100`
= `sqrt(1.14) xx 100`
= 106.7
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Index Number is a technique of measuring changes in a variable or group of related variables with reference to time, geographical location and other characteristics. Index Number is very useful for economists, farmers, traders, government, educationalists and trade union leaders for planning and implementing the plans according to their sector. The scope of index number is not limited to only one subject but it extends to many subjects such as Economics, Educational science, Psychology, History, Sociology, Geography etc. While framing index number its objective must be determined. To attain the objective the information is collected in various ways and this information is used for comparing two different time periods. For this purpose, the base year’s index is assumed as 100 and accordingly the value of the current year is calculated. Laspeyre, Paasche and Fisher have suggested different methods for constructing index numbers. |
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| Group A | Group B |
| 1) Price Index | a) `(sump_1q_1)/(sump_0q_0)xx100` |
| 2) Value Index | b) `(sumq_1)/(sumq_0)xx100` |
| 3) Quantity Index | c) `(sump_1q_1)/(sump_0q_1)xx100` |
| 4) Paasche's Index | d) `(sump_1)/(sump_0)xx100` |
