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# Symbolically lp bowley s price index number p01b 2 1

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Unformatted text preview: n 8.5952 = Antilog 4 = Antilog [ 2.1488] = 140.9 10.5.3 Weighted aggregate index numbers In order to attribute appropriate importance to each of the items used in an aggregate index number some reasonable weights must be used. There are various methods of assigning weights and consequently a large number of formulae for constructing index numbers have been devised of which some of the most important ones are 1. Laspeyre’ s method 2. Paasche’ s method 3. Fisher’ s ideal Method 4. Bowley’ s Method 5. Marshall- Edgeworth method 6. Kelly’ s Method 246 1. Laspeyre’ s method: The Laspeyres price index is a weighted aggregate price index, where the weights are determined by quantities in the based period and is given by Σp1q 0 Laspeyre’ s price index = P01L = × 100 Σp 0 q 0 2. Paasche’ s method The Paasche’ s price index is a weighted aggregate price index in which the weight are determined by the quantities in the current year. The formulae for constructing the index is Σp1q1 Paasche’ s price index number = P01P = × 100 Σp 0 q1 Where P0 = Price for the base year P1 = Price for the current year q0 = Quantity for the base year q1 = Quantity for the current year 3. Fisher’ s ideal Method Fisher’ s Price index number is the geometric mean of the Laspeyres and Paasche indices Symbolically Fisher’ s ideal index number = P01F = L × P Σp1 q 0 Σp1q1 × × 100 Σp 0 q 0 Σp 0 q1 It is known as ideal index number because (a) It is based on the geometric mean (b) It is based on the current year as well as the base year (c) It conform certain tests of consistency (d) It is free from bias. 4. Bowley’ s Method: Bowley’ s price index number is the arithmetic mean of Laspeyre’ s and Paasche’ s method. Symbolically L+P Bowley’ s price index number = P01B = 2 1 Σp1q 0 Σp1q1 = + × 100 2 Σp 0 q 0 Σp 0 q1 = 247 5. Marshall- Edgeworth method This method also both the current year as well as base year prices and quantities are considered. The formula for constructing the index is Σ(q 0 + q1 )p1 Marshall Edgeworth price index = P01ME = × 100 Σ(q 0 + q1 )p 0 Σp1q 0 + Σp1q1 = × 100 Σp 0 q 0 + Σp 0 q1 6. Kelly’ s Method Kelly has su...
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## This note was uploaded on 01/18/2014 for the course BUS 100 taught by Professor Moshiri during the Winter '08 term at UC Riverside.

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