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:

 

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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.

 

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Solution:

 

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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

 

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Here,

 

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Therefore,

 

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

15 responses to Fisher Ideal Price Index

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.

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

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

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….

thank very much for this useful information, i am currently doing Msc in Statistics, the information is helpful to my study.

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

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

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