Question

Compute a Price Index for the following by (i) Simple Aggregative Method, and (ii) Average of Price Relative Method:

Commodities	A	B	C	D	E	F
Price in 2004 (₹)	20	30	10	25	40	50
Price in 2018 (₹)	25	30	15	35	45	55

Answer 1

(i) Simple Aggregate Method

	2004 (P0)	2018 (P1)
A B C D E F	20 30 10 25 40 50	25 30 15 35 45 55
	∑P0 =​ 175	∑P1 = 205

$P_{01}=\frac{\Sigma P_1}{\Sigma P_0}=\frac{205}{175}\times 100=117.14$
(ii) Price Relative Method

	2004 ​(P0)	2018 ​(P1)	Price Relative =$\frac{P_0}{P_1}\times 100$
A	20	25	$\frac{25}{20}\times 100=125$
B	30	30	$\frac{30}{30}\times 100=100$
C	10	15	$\frac{15}{10}\times 100=150$
D	25	35	$\frac{35}{25}\times 100=140$
E	40	45	$\frac{45}{40}\times 100=112.5$
F	50	55	$\frac{55}{50}\times 100=110$
			∑ = 737.5

$P_{01}=\frac{\Sigma \left({\displaystyle \frac{P_0}{P_1}}\times 100\right)}{N}=\frac{737.5}{6}=122.91$