Distinguish between : Laspeyre’s Price Index Number and Paasche’s Price Index Number
Q.2 (B) (ii) Distinguish between : Laspeyre’s Price Index Number and Paasche’s Price Index Number
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Answer: See the table below.
| Point | Laspeyre’s Price Index | Paasche’s Price Index |
|---|---|---|
| Weights | Base year quantities (q0) are used as weights. | Current year quantities (q1) are used as weights. |
| Formula | \(P_{01} = \frac{\sum p_1q_0}{\sum p_0q_0}\times 100\) | \(P_{01} = \frac{\sum p_1q_1}{\sum p_0q_1}\times 100\) |
| Bias | Tends to overstate the rise in prices (upward bias). | Tends to understate the rise in prices (downward bias). |
| Ease | Simpler; base year weights need not be collected every year. | Current year quantities must be collected every year, so more difficult. |
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· 28 Oct 2026
AI-verified · Oct 2026
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