paasche’s Price Index

If the quantities of current time period are taken as weights, the weighted aggregative index is called Passche’s Price Index. Since Passche’s Price Index is calculated by taking current year quantities as base therfore it is also called current year quantity weight method.  Mostly, the index indicates  downward trend and inclines to be lower than it should be. The formula for calculating Passche’s Price Index is given as:

 

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Problem: Calculate price index using Paasche formula

  • Take 1986 as base year
  • Chain base method

 

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Solution:

 

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Fixed Base Method

 

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Chain Base Method

 

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Summary of the Results

 

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