Weighted aggregate price index

The ratio of the sum of weighted prices of current and base time periods multiplied by 100 is called weighted aggregate price index. This index is calculated after allocating weights to each commodity on the basis of their relative importance. Weights of these commodities are then multiplied by the prices of base and current time periods. These prices are called weighted prices.

 

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Problem: For the data given below in the table, calculate weighted aggregate price index for 1996 and 1997 using 1995 as base year.

 

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Solution:

 

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