If the quantities of base time period are taken as weights, the weighted aggregative price index is called Laspeyres price index. This method of calculating price index is also called base year quantity weight method. The appropriateness of laspeyres price index depends upon the quantities purchased during the base year. If the base period quantities are reasonable weights to apply to all time periods then the calculation of this index is appropriate. On the other hand if relative quantities change significantly from those in the base period then the calculation of this index is inappropriate. This index can be calculated by using the formula given below.

Here,

Pn is the price of commodity in current year and Po is the price of commodity in base

Qo is the quantity of commodity in base

**Problem A:** Calculate price index using laspeyres formula. Take 1980 as base year.

**Solution:**

**Problem B:** Calculate price index using laspeyres formula. Take 1995 as base year.

**Solution:**

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Thks for helping understand this topic very well

thank you very much

Thanks, the notes are good and they assisted me in my problem area.

thank you very much for understanding it in a easy manner…

Thanks for the corporation, it is more helpful

How do we calculate larpeyres given two prices in a year as well as quantity

great site

This article is indeed very helpful!

thanks for the article.

i have a question:

for example we have the weight of the items in basket of goods and the price of each item, now how should we determine the price index?

Thanks alot. simple but effective post 🙂