PRC-2 · Chapter 9 · Question 17 of 60
Why is the Laspeyres price index typically used more frequently in practical economic applications than the Paasche price index?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: B) It does not require gathering new quantity data every year to recalculate the denominator.
Explanation
Laspeyres is used more heavily in practice because, unlike Paasche, its denominator is fixed and does not have to be recalculated every year to account for newly discovered quantities.
More Indices MCQs
- Q19The Consumer Price Index (CPI) is fundamentally designed to mathematically measure:
- Q20If an inflation price index is calculated as 116 in the current year with a base year index of 100, what is the precise interpretation?
- Q21A commodity's price was Rs. 4,500 in the base year 20X8 and rose to Rs. 5,400 in 20Y0. What is the simple price relative index for 20Y0?
- Q22Which statistical index number explicitly utilizes the current period's consumed quantities (q1) as its strict weighting factor?
- Q23When calculating a chained index, how is the link relative for a specific year manually determined?