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CMA Foundation · Fundamentals of Business Mathematics and Statistics · Index Numbers and Time Series

For a group of commodities, Laspeyres' price index is 144 and Paasche's price index is 100. What is Fisher's ideal price index?

Fisher's ideal index is 120. It is the geometric mean of Laspeyres' and Paasche's indices, so √(144 × 100) = √14400 = 120. Taking the arithmetic mean instead would give 122, which is not Fisher's index.

  1. A100
  2. B120Correct
  3. C122
  4. D144

Explanation

Fisher's index is the geometric mean of Laspeyres and Paasche indices: √(144×100) = √14400 = 120. The arithmetic mean, 122, is wrong because Fisher's index uses the geometric mean.

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