Question

Using the following data, construct Fisher’s Ideal index and show how it satisfies Factor Reversal Test and Time Reversal Test?

Commodity	Price in Rupees per units		Number of units
	Base year	Current year	Base year	Current year
A	6	10	50	56
B	2	2	100	120
C	4	6	60	60
D	10	12	50	24
E	8	12	40	36

Answer 1

Fisher’s ideal index

Time reversal test: 

To prove P₀₁ × P₁₀ = 1

Time reversal test is satisfied.

Factor Reversal Test:

Factor Reversal Test is satisfied.