discuss the simple aggregative price index. what are it's limitations?
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Explanation:
Two main disadvantages of the simple aggregate price index are:
➡️ (i) it is sensitive to the units of measurement for each commodity. (ii) it fails to consider the relative importance of the commodities. 4 The first disadvantage may be overcome by changing to a simple average of price relative index.
What are limitations of index number?
➡️ Limitations of Index Numbers. They are simply rough indications of the relative changes. The choice of representative commodities may lead to fallacious conclusions as they are based on samples. There may be errors in the choice of base periods or weights, etc.
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