The formula to calculate Passche price index is (o is the base year and n is the given year) ?
Correct answer: A. P = ΣPnqn/Σpoqn
- A. P = ΣPnqn/Σpoqn
- B. P = ΣPoqo/Σpnqn
- C. P = ΣPnqo/Σpoqo
- D. P = ΣPnqn/Σpoqo
Explanation
The Paasche price index uses current-year quantities as weights, so it divides the cost of the current basket at current prices by its cost at base-year prices: ΣPnqn ÷ ΣPoqn. That is option a.
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