Question

Distinguish between Laspeyre's and Paasche's index.

Answer 1

Laspeyre's Index uses the base period quantities $q_0$ as weights. The following formula is used construct Laspeyre's Index:

$P_{01}=\frac{\sum p_1{q}_0}{\sum p_0{q}_0}\times 100$

Paasche's Index uses the current period quantities $q_0$ as weights. The following formula is used construct Paasche's Index:

$P_{01}=\frac{\sum p_1{q}_1}{\sum p_0{q}_1}\times 100$