CA Foundation · Quantitative Aptitude · Index Numbers
Which statement about Fisher's ideal index number is correct?
Fisher's ideal index is the geometric mean of the Laspeyres and Paasche price indices. It uses both base and current year quantities and satisfies the time reversal and factor reversal tests, which is why it is called ideal.
- AIt is the geometric mean of the Laspeyres and Paasche indicesCorrect
- BIt is the arithmetic mean of the Laspeyres and Paasche indices
- CIt is the harmonic mean of base and current year prices
- DIt uses only base year quantities as weights
Explanation
Fisher's index = √(Laspeyres × Paasche), a geometric mean. The arithmetic mean of the two is the Drobisch-Bowley index. Fisher uses both base and current quantities, not only base ones.
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