Types of Simple Price Index

Types of Simple Price Index

1.    Simple Aggregative Price Index

Simple aggregative price index may be calculated by the following formula

Price Index = ∑Pn / ∑Po x 100

Pn= current aggregative Price

Po= Base aggregative price

2.    Simple Price Relative Index

Simple price relative index may be calculated by the following formula

Simple price index = 1/k x ∑[pn/po]

Types of weighted Price Index

Weighted price index is calculated by assigning weight (importance) to prices , famous weighted price index includes lasper price index & Paasche Price Index

1.    Lasper Price Index

Lasper price index is calculated by the following formula

Price index = [∑Pnqo/∑Poqo] x 100

Prices are weighted by the base quantity of the commodities.

2.    Paasche Price Index

Paasche price index is calculated with following formula

Price index = [∑Pn x qn/∑Po x qn] x 100

Prices are weighted with the current quantity i.e. both current prices & base prices are weighted with the base quantity.