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Question
Explain Paasche’s price index number
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Solution
Paasches price index number
`"P"_01^"L" = (sum"p"_1"q"_1)/(sum"p"_0"q"_1) xx 100`
Where P1 = current year price
q1 = Current year quantity
p0 = Base year price
q0 = Base year quantity
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| A | 170 | 562 | 72 | 632 |
| B | 192 | 535 | 70 | 756 |
| C | 195 | 639 | 95 | 926 |
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| 9 | 12.6 | 12.5 | 12.3 | 12.6 |
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Read the given passage and answer the questions:
|
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. |
- Explain the meaning of Index Number.
- To whom the Index Number is useful?
- Express your opinion about the given passage.
