Question

Which index number shows downward bias

Answer 1

Answer:

For one article, with prices unweighted, this test is always satisfied. If this product is greater than unity, the index number is said to have an upward bias. If this product is less than unity, the index number is said to have a downward bias.

Answer 2

Answer:

Paasche's index number shows downward bias.

Step To Step Explanation

The index number is downward bias if the product is less than unity. The downward bias can create because the fixed weights in the current period, time t, reflect current purchasing patterns after substitution and give more importance to those items that have experienced relatively small price changes and are purchase in larger quantities than in the base period.