# Fisher Ideal Price Index

The geometric mean of Laspeyre’s and Paasche’s price indices is called Fisher’s price Index. Fisher price index uses both current year and base year quantities as weight. This index corrects the positive bias inherent in the laspeyres index and the negative bias inherent in the paasche index. Fisher’s price index is also a weighted aggregative price index because it is an average (G.M) of two weighted aggregative indices. The computational formula for the fisher ideal price index is:

Problem: Construct Fisher’s price index for the data given below: (Base = 2004). Also show that fisher’s index is the geometric mean of laspeyre and paache indices.

Solution:

### Fisher’s index is the geometric mean of laspeyre and paache indices

To check that Fisher’s index is the geometric mean of Laspeyre and Paache indices, we have

Here,

Therefore,

Hence it is proved that Fisher’s index is the geometric mean of Laspeyre and Paache indices.

### 40 responses to Fisher Ideal Price Index

barani says:

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Dr Mayuri Doshi says:

I have taken MBA course from Sikkim Manipal University.This formula is not given in the book , but is asked in the assignments.I could answer with the help of the formula given.

Majune Kraido Socrates says:

The site is very helpful.Thanks

james says:

thank u so much.am a student in the university of nairobi.am taking a degree in economics and statistics.

ms4days says:

So why is this a reasonable or useful way to describe production (as in the Federal Production Index)?

Tozer Mwalwanda says:

Thanks. Easy to understand

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SIDWAKA says:

a very comprehensive explanation! thanks

Mr. Jasmin shah says:

I am doing Distance Education MBA from sikkim Manipal university. This question has been asked in the assignment but not given in the text book. Thanks for the guidence….

Vinod says:

Very good & useful website which lists out the definitions with related examples.

mr sheriff says:

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mr sheriff says:

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mr sheriff says:

I am doing Msc in Statistics, the website has been very useful for my studies. Thank you very much.

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Nebert says:

am a student at Masinde Muliro university. Thanks

James says:

Good job

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hello m mba student from desh Bhagat university

thanks for helping to me

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eric says:

the site is so helpful, especially in determining the pn,qn, po,qo,,, thenks alot,,,, student at UNIVERSITY OF KABIANGA, KENYA

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wanyama says:

student at Maseno university doing BBA. thanks alot this site is very much helpful to me

yamuna says:

tis help me a lot thank u very much

how do you calculate the indices when you are given three or more years instead of two?

interpretation there is net increase of price by 49.40% in 2008 compared to 2004

mxolisi dube says:

thank you very much for your assistancen i have answered my assignment problem easily……

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Wow it’s wonderful…. I love it

Palibe Kaude says:

thanks a lot for the interpretation. the site is very helpful indeed…

HABIMANA JEAN BOSO says:

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Salehe Rajabu says:

Thanks a lot. I’m student at The University of Dodoma TANZANIA pursuing BA Economics and Statistics. THE explanation is very helpful

Kennedy orwa says:

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nmurthy says:

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Don says:

Accurate!

benja says:

thankyou….am a student in TAITA TAVETA UNIVERSITY taking MBA ,,,,,it worked

josef saint louw says:

how do i interpret the results i got using the forular

There’s a mistake … After multiply these digits 148.507×150.29 the answer is 22319.117 .. Not 122319.117 …

mahmudur says:

I want to know about advantages of Fisher’s Ideal Index.

SOT says:

wow ………! it’s quiteinteresting.