Eco 6.2

The Value Index Number calculates:

• The total price of commodities.

• price x quantity

• The relative price changes of specific commodities.

• The total quantity of commodities

What does Paasche’s Price Index Number consider as weights?

• Base year quantity

• Base year prices.

• Current year quantity

• Current year price

P₀₁ = (Σp₁q₁ / Σp₀q₁) × 100

• Paasche's Price Index Formula:

• Laspeyres' Price Index Formula:

• Quantity Index Number Formula:

• Value Index Number Formula:

Value Index Number Formula:

• (Σp₁q₁ / Σp₀q₁) × 100

• (Σp₁q₁ / Σp₀q₀) × 100

• (Σp₁ / Σp₀) × 100

• none

Laspeyres' Price Index Formula:

• (Σp₁q₀ / Σp₀q₀) × 100

• (Σp₁q₁ / Σp₀q₁) × 100

• Both

• None

What does Laaspeyre's Price Index Number consider as weights?

• Current year price

• Base year price

• Current year quantity

• Base year quantity

Why can arbitrary weights be a problem in index numbers?

• Weights are always chosen logically and based on consumer preferences

• Weights could be assigned without proper reasoning.

• Weights are always chosen by the government.

• Weights are fixed and don’t change over time.

How do defects in formulae affect index numbers?

• They make index numbers always accurate.

• They allow index numbers to adjust to every situation.

• Hiding extremes or distorting the true picture.

• They ignore external factors such as weather.