Question

The paasche's and fisher's index numbers are 169 and 156 respectively,then laspetres index number is

Answer 1

If the Paasche’s index number is 169 and the Fisher’s index number is 156 then the Laspeyres index number is 144.

Step-by-step explanation:

• Fisher’s index number is basically termed as the geometric mean or geometric average of the Laspeyres price index (this uses the base period basket) and the Paasche’s price index (this uses the current period basket).

• Fisher’s index is also called as the ideal price index. Since despite being so much difference in the prices and the quantities at the base and current period, the time-reversal test and the factor-reversal test are still satisfied by the formula.

The formula for the Fisher’s Index Number is given by,

Pf = √[Pp * Pl]  

Here,

Pf = Fisher’s index number = 156

Pp = Paasche’s index number = 169

Pl = Laspeyres index number

Thus, by substituting the given values in the formula, we get

Pf = √[Pp * Pl]  

⇒ 156 = √[169 * Pl]  

⇒ 156 = 13 * √[Pl]  

⇒ √[Pl] = 156/13

⇒ √[Pl] = 12

squaring both sides

⇒ Pl = 144

Thus, the Laspeyres price index number is 144.

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