Question

Consumer price index are obtained by:

• A. Paasche's formula
• B. Fisher's ideal formula
• C. Marshall Edgeworth formula
• D. Family budget method formula

Answer 1

The correct option is D Family budget method formula

$\Rightarrow$ Consumer price index are obtained by: $Familybudgetmethodformula.$

$\Rightarrow$ In this method, the family budgets of a large number of people are carefully studied and the aggregate expenditure of the average family for various items is estimated.

$\Rightarrow$ These values are used as weights. The current year’s prices are converted into price relatives on the basis of the base year’s prices, and these price relatives are multiplied by the respective values of the commodities in the base year. The total of these products is divided by the sum of the weights and the resulting figure is the required index numbers.

$P_{0n}=\frac{\sum WI}{\sum W}$ Here, $I=\frac{P_n}{P_0}\times 100$ and $W=P_0{q}_0$