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in Economics by (43.3k points)
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The quantity consumed and total expenditure of four different items are as given below. Find Paasche’s and Fisher’s index numbers for the year 2015 with respect to the year 2013.

Item base year 2013 Current year 2015
Total expenditure Consumption Total expenditure Consumption
A 360 60 kg 375 25 kg
B 160 10 litre 416 20 kg
C 480 15 kg 613.2 6 kg
D 336 3 kg 400 2.5 kg

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Best answer

 Here, quantity (consumption) of items and their total expenditure are given. We obtain the price per unit of item using the formula,

Price per unit =  \(\frac{Total \,expenditure} { Quantity }\)

We take p0 = Price in 2013,

p1 = Price in 2015,

q0 = Quantity in 2013

and q1 = Quantity in 2015.

The table for calculation is prepared as follows:

Paasche’s index number:

\(I_p=\frac{\sum {p_1\,q_1}}{\sum{p_0\,q_1}}\)

\(=\frac{1804.2}{942}\)

= 1.53

Fisher’s index number:

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