1. Aggregate expenditure method:
(i) Index number = \(\frac{Σp_1q_0}{Σp_0q_0}\)
Where, Σp1q0 = Total expenditure of current year
Where, Σp0q0 = Total expenditure of base year
[Note: This is Laspeyre’s Index number.]
(ii) Index number = \(\frac{Σp_1q_0}{Σp_0q_0} × 100\)
Where, Σp1q1 = Total expenditure of current year
Σp0q0 = Total expenditure of base year corresponding to quantity of current year
[Note: This is Paasche’s Index number.]
2. Family budget method:
Index number = \(\frac{ΣIW}{ΣW}\)
Where, I =\(\frac{ p_1}{p_0} × 100\)
W = p0q0 = Expenditure of base year
[Note: In the formula, if we replace, Pi
W = p0q0 > I = p1p0 it is Laspeyres Index number.]
