Does marshall index number satisfy the time reversal test.
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The factor reversal test requires that multiplying a price index and a volume index of the same type should be equal to the proportionate change in the current values
Time reversal test. This test is proposed by Irving Fisher. According to him, an index number (formula) should be such that when the base year and current year are interchanged (reversed) the resulting index number should be the reciprocal of the earlier
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The factor reversal test requires that multiplying a price index and a volume index of the same type should be equal to the proportionate change in the current values
Time reversal test. This test is proposed by Irving Fisher. According to him, an index number (formula) should be such that when the base year and current year are interchanged (reversed) the resulting index number should be the reciprocal of the earlier
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Explanation:
Let P10 be the index number (based on the same formula) for the period '0' with respect to the base period '1'. ...Time reversal test is not satisfied by Laspeyre's and Paasche's index numbers. But it is satisfied byMarshall – Edgeworth and Fischer's ideal index numbers.
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