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11.3 Weighted Index Numbers

11.3 Weighted Index Numbers. simple relative price index. simple relative quantity index. UNWEIGHTED INDEX NUMBER. simple aggregate index. simple relative quantity index. relative average index. Unweighted Index. All items are treated equally and without using any weight. Weighted Index.

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11.3 Weighted Index Numbers

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  1. 11.3 Weighted Index Numbers

  2. simple relative price index simple relative quantity index UNWEIGHTED INDEX NUMBER simple aggregate index simple relative quantity index relative average index

  3. Unweighted Index All items are treated equally and without using any weight. Weighted Index An index that can shows the importance of certain items is known as a weighted index.

  4. WEIGHTED INDEX NUMBER Paasche quantity index Laspeyres price index Paasche price index Laspeyres quantity index

  5. (a) Laspeyres Price Index A Weighted Aggregate Price Index where the quantities of the items used in the base year are used as weight for the items.

  6. Calculation for Laspeyres index for year t: p1 - price in ________ p0 - price in the _______ q0 - quantity in the _______ year (as weightier).

  7. (b) Paasche Price Index A Weighted Aggregate Price Index where the quantities of the items used in the year under consideration are used as weights of the items.

  8. Calculation of the Paasche index for year t: p1 - price in _______ p0- price in the ________ q1 - quantity in the _______

  9. (c) Laspeyres Quantity Index where ___ as weightier. (d) Paasche Quantity Index where ____ as weightier.

  10. Example 1 : Consider the following table containing data on airline tickets.

  11. By taking year 1990 as a base year, calculate (a) Laspeyres price index for year 2000. (b) Paasche price index for year 2000. (c) Laspeyres quantity index for year 2000. (d) Paasche quantity index for year 2000.

  12. Solution (a)Laspeyres price index for year 2000 Conclusion: Laspeyres price index _______ shows that the airline tickets price _________ by _____ in year 2000 as a comparison to year 1999.

  13. (b) Paasche price index for year 2000 Conclusion: Paasche price index ______ shows that the airline tickets price _________ by _____ in year 2000 in comparison with year 1999.

  14. c) Laspeyres quantity index for year 2000 Conclusion: Laspeyres quantity index _______ shows that the quantity of airline tickets sales __________ by _______ in year 2000 in comparison to year 1999.

  15. (d) Paasche quantity index for year 2000 Conclusion :Paasche quantity index ________ shows that the quantity of airline tickets sales has _________________ in year 2000 in comparison with year 1999.

  16. Example 2: Consider the following table containing data on goods.

  17. By taking year 1980 as the base year, calculate (a) Laspeyres price index for year 1985. (b) Paasche price index for year 1985. (c) Laspeyres quantity index for year 1985. (d) Paasche quantity index for year 1985.

  18. Solution:(a)Laspeyres price index for year 1985

  19. (b)Paasche price index for year 1985

  20. (c)Laspeyres quantity index for year 1985

  21. (d) Paasche quantity index for year 1985

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