From the following data, construct a pri...

From the following data, construct a price index number by using Fisher's Ideal Formula:

Text Solution

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Since we are given the expenditure and the price, we can obtain the quantity by dividing total expenditure by the price for each commodity. We can then apply Fisher's Formula.

By Fisher's Formula:
`P_(01)=sqrt((Sigmap_(1)q_(0))/(Sigmap_(0)q_(0))xx(Sigmap_(1)q_(1))/(Sigmap_(0)q_(1)))xx100`
`=sqrt((202)/(91)xx(199)/(92))xx100`
`=sqrt(4.8015)xx100`
`=2.1912 xx 100`
`= 219.12`

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We use price index numbers

To measure prices

To measure and compare prices,

To measure quantity

None of these

Index number is used in

Knowledge of living standard

Information regarding production

Information regarding foreign trade

All of these.

Fisher’s Price Index Number is

`sqrt(P_(01)(L)xxP_(01)(P))`

`P_(01)(L) xxP_(01)(P)`

`sqrt(P_(01)(L)xxP_(01)(P))xx100`

`sqrt(P_(01)(L) xxP_(01)(P))`