Question

A weight aggregate price index where the weight for each item is its base period quantity is known as the
A. Paasche Index
B. Consumer Price Index
C. Producer Price Index
D. Laspeyres Index

Answer 1

Hint: In this problem, we can see about the Laspeyres Index, where A weight aggregate price index where the weight for each item is its base period quantity is known as the Laspeyres Index. We should know that it is a methodology to calculate the consumer price index by measuring the change in the price of the basket of goods to the base year. We can now see about it.

Complete step by step answer:
Here, we know that,
A weight aggregate price index where the weight for each item is its base period quantity is known as the Laspeyres Index.
We should know that,
Laspeyres Index is a methodology to calculate the consumer price index by measuring the change in the price of the basket of goods to the base year.
It was invented by Etienne Laspeyres, an economist from Germany to analyse the change in the price as compared to the base year period.
We should know that, the index generally uses a base year of 100 to analyse the index, where an index greater than 100 implies the rise in price and index less than 100 implies a fall in price.
We should know that the formula of Laspeyres Price Index is,
Laspeyres Index Formula = \[\dfrac{\sum{\left( \text{Observation Price} \times \text{Base Quantity} \right)}}{\sum{\left( \text{Base Price} \times \text{Base Quantity} \right)}}\].

So, the correct answer is “Option D”.

Note: We should always remember that the index generally uses a base year of 100 to analyse the index, where an index greater than 100 implies the rise in price and index less than 100 implies a fall in price. Therefore, to calculate the consumer price index by measuring the change in the price of the basket of goods to the base year is known as Laspeyres Index.