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CA Foundation · Quantitative Aptitude · Index Numbers

In the Laspeyres price index, which set of quantities is used as weights?

Laspeyres price index uses base year quantities as weights. It is computed as Σp1q0 divided by Σp0q0, multiplied by 100. Paasche, by contrast, uses current year quantities, while Marshall-Edgeworth uses the average of base and current quantities.

  1. ABase year quantitiesCorrect
  2. BCurrent year quantities
  3. CAverage of base and current year quantities
  4. DQuantities of the year preceding the base year

Explanation

Laspeyres price index = Σp1q0/Σp0q0 × 100. It keeps base year quantities q0 fixed as weights. Paasche uses current year quantities q1, and the average of the two is used in the Marshall-Edgeworth index, so those options are wrong.

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