CA Foundation · Quantitative Aptitude · Index Numbers
In the weighted average of price relatives method, with price relatives P and weights W (W = p0q0), the index number is given by:
The weighted average of price relatives index equals the sum of each price relative multiplied by its weight, divided by the sum of the weights. It is a weighted arithmetic mean, with weights usually taken as base-year values p0q0.
- AΣPW / ΣWCorrect
- BΣP / ΣW
- CΣPW / ΣP
- DΣW / ΣPW
Explanation
Each price relative is multiplied by its weight, the products are added, and the total is divided by the sum of the weights. This is a weighted arithmetic mean of price relatives. The other forms do not represent a weighted mean.
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