Fisher's price index is obtained by taking the:
Correct answer: D. Geometric mean of Laspeyres and Paasche indices
- A. Arithmetic mean of Laspeyres and Paasche indices
- B. Ratio of Laspeyres to Paasche indices
- C. Difference between Laspeyres and Paasche indices
- D. Geometric mean of Laspeyres and Paasche indices
Explanation
Fisher's price index is the geometric mean of the Laspeyres and Paasche price indices. The arithmetic mean is associated with the Dorbish-Bowley index, which is a common trap.
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About Index Numbers
Index numbers measure relative changes in prices, quantities or values over time using a base period. Work includes simple and weighted price indices, aggregate methods, consumer price calculations, percentage change and purchasing power, with attention to choosing a base year and interpreting an index rather than treating it as an absolute amount.
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