The Marshall-Edgeworth price index uses which quantities as weights?
Correct answer: A. The average of base and current quantities
- A. The average of base and current quantities
- B. Only current-period quantities
- C. Only base-period quantities
- D. The difference between the two quantities
Explanation
The Marshall-Edgeworth index weights prices by the sum or average of base-period and current-period quantities. Using only base quantities gives the Laspeyres approach, while only current quantities gives Paasche's approach.
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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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