CA Foundation · Quantitative Aptitude · Index Numbers
Fisher's ideal price index P01 for a group of goods is 1.5 (as a ratio) and Fisher's ideal quantity index Q01 is 1.2. What is the value ratio Σp1q1/Σp0q0 according to the factor reversal test?
Because Fisher's index satisfies the factor reversal test, the price index times the quantity index equals the value ratio. So 1.5 × 1.2 = 1.80. The value in the current year is 1.8 times the base year value.
- A1.35
- B1.80Correct
- C2.70
- D0.80
Explanation
Fisher's index satisfies the factor reversal test, so P01 × Q01 equals Σp1q1/Σp0q0. The product is 1.5 × 1.2 = 1.80. Averaging them to 1.35 is wrong because the test uses the product, not the mean.
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