Laspeyre's index is based on
A. Arithmetic mean of Laspeyre's and Paasche's index
B. Median of Laspeyris and Paaschis index
C. Geometric mean of Laspeyre's and Paasche's index
D. None of these
Answer: Option C
Solution(By Examveda Team)
Laspeyre's index and Paasche's index are two important methods used to calculate price indices in economics. Laspeyre's index is based on the geometric mean of these two indices.Laspeyre's Index: It is a price index where the base-year quantities are used as weights. Mathematically, it is represented as:
Laspeyre's Index = (Σ Current Year Prices * Base Year Quantities) / (Σ Base Year Prices * Base Year Quantities)
Paasche's Index: It is another price index where the current-year quantities are used as weights. Mathematically, it is represented as:
Paasche's Index = (Σ Current Year Prices * Current Year Quantities) / (Σ Base Year Prices * Current Year Quantities)
The geometric mean of Laspeyre's and Paasche's indices is used to reduce the bias that can be present in each of these indices when used alone. It provides a more balanced measure of price change.
So, the correct answer is Option C: Geometric mean of Laspeyre's and Paasche's index.
This Question Belongs to Commerce >> Business Statistics And Research Methods
Join The Discussion
Comments ( 1 )
Related Questions on Business Statistics and Research Methods
A. The central limit theorem
B. The law of statistical regularly
C. The law of inertia of large numbers
D. None of the above
The difference between sample statistic and its corresponding population parameter is
A. Sampling error
B. Measurement error
C. Coverage error
D. Non-response error
A. Both (A) and (R) are true
B. (A) is true, but (R) is false
C. (A) is false, but (R) is true
D. Both (A) and (R) are false
The answer mentioned in the above is wrong. Answer is none of these.
Dorbish and Browley's Method is arithmetic mean of Laspeyre's index and Passche's index