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CA Foundation · Quantitative Aptitude · Index Numbers

In constructing a weighted aggregative price index, the Laspeyres method uses which of the following as weights?

Laspeyres price index uses base year quantities as weights. Its formula is Σp1q0 divided by Σp0q0, multiplied by 100. Current year quantities are used by the Paasche index, so they are not the Laspeyres weights.

  1. ABase year quantitiesCorrect
  2. BCurrent year quantities
  3. CAverage of base and current year quantities
  4. DCurrent year prices

Explanation

Laspeyres price index = (Σp1q0 / Σp0q0) × 100, so the weights are base year quantities q0. Current year quantities are the weights in the Paasche index, and the average of the two quantities is used in the Marshall-Edgeworth index.

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