CMA Foundation · Fundamentals of Business Mathematics and Statistics · Index Numbers and Time Series
For three items, the data are: A: p0 = ₹10, p1 = ₹12, q1 = 30; B: p0 = ₹20, p1 = ₹24, q1 = 10; C: p0 = ₹5, p1 = ₹6, q1 = 20. Here p0, p1 are base and current prices and q1 is the current-year quantity. The Paasche price index is:
The Paasche price index is 120. Using current-year quantities, the basket costs ₹720 at current prices and ₹600 at base prices. The ratio 720 over 600 times 100 equals 120. Inverting the ratio would wrongly give 83.3.
- A83.3
- B118
- C120Correct
- D125
Explanation
Σp1q1 = 12×30 + 24×10 + 6×20 = 360+240+120 = 720. Σp0q1 = 10×30 + 20×10 + 5×20 = 300+200+100 = 600. Paasche = 720/600×100 = 120. The value 83.3 comes from inverting the ratio, which is wrong.
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