# Laspeyres Price Index

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:

### 27 responses to Laspeyres Price Index

sandra says:

Thks for helping understand this topic very well

kendrick says:

thank you very much

Pedzisayi Sakuhuni says:

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

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

Gayathri says:

Thanks for the corporation, it is more helpful

amoah says:

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

adima joseph says:

great site

Paul says:

This article is indeed very helpful!

amin says:

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?

Heshan says:

Thanks alot. simple but effective post 🙂

gaitsiwe says:

thank you so much

muhib ullah says:

thank you very much for ur cooperation..

silas chapo says:

thank you so much

Gigii says:

thank you

robert sithole says:

thank you sir

Collins mwape says:

thank you for explaining this topic on a simplier way for me to understand

Rashid Sultan says:

if the quantities of current year and base year are changed, then which quantity would be chosen?

Risitha says:

Thank you so much, excellent explanation, tomorrow I got a exam

Natalie White says:

Is there any practice problems that one can do?

this has helped me alot great work ….thumbs up

Tuyisenge jean paul says:

Fine this is important channel of where our ideas will be exchanged through laypeyres price and quantities.

keep up !

Kelvin Jeketera says:

easily understood

mazy_tnl says:

thank you

Abdullahi usuf says:

What is the current defination of laspyers, that is defined from 2000 till date?

usuf says:

What can someone consider before chosen a specific year as the base year pls?

Isaac Dzikamayi says:

thanks, very helpful

Anvita says:

There is a problem,if there are 3 are given then how will it be calculated…. please respond as possible