Paasche Price Index Calculator
पाश्चे मूल्य सूचकांक कैलकुलेटर
Calculate the Paasche Price Index to measure price changes using current year quantities as weights. Get detailed step-by-step solutions.
| Commodity | P₀ (Base Price) | P₁ (Current Price) | Q₁ (Current Quantity) | Action |
|---|
Where:
\( P_{01}^P \) = Paasche Price Index
\( P_0 \) = Price in base year
\( P_1 \) = Price in current year
\( Q_1 \) = Quantity in current year
\( \sum \) = Summation (total of all commodities)
| Commodity | P₀ | P₁ | Q₁ | P₀Q₁ | P₁Q₁ | Price Change % |
|---|
Paasche Price Index: Complete Guide
पाश्चे मूल्य सूचकांक: पूरी मार्गदर्शिका
What is the Paasche Price Index?
The Paasche Price Index, developed by German economist Hermann Paasche in 1874, is a method of calculating inflation or price changes over time. It compares the cost of the current basket of goods and services with what the same basket would have cost in the base period, using current period quantities as weights.
Complete Formula and Calculation
Paasche Price Index Formula:
\[ P_{01}^{P} = \frac{\sum P_1 Q_1}{\sum P_0 Q_1} \times 100 \]
Where:
- \( P_{01}^{P} \) = Paasche Price Index from period 0 to period 1
- \( P_0 \) = Price of each commodity in the base period (period 0)
- \( P_1 \) = Price of each commodity in the current period (period 1)
- \( Q_1 \) = Quantity of each commodity in the current period (period 1)
- \( \sum \) = Summation across all commodities
Advantages of Paasche Index
- Current Consumption Patterns: Reflects current consumption patterns by using current year quantities
- No Substitution Bias: Accounts for consumer substitution of goods when prices change
- Realistic Weighting: Uses weights that reflect current economic reality
- Better for Quality Changes: More responsive to quality improvements in goods
Limitations of Paasche Index
- Downward Bias: Tends to underestimate inflation when compared to Laspeyres
- Data Requirements: Requires current year quantity data which may be difficult to obtain
- Changing Basket: Makes year-to-year comparisons less consistent
- Complex Calculation: More complex than Laspeyres as weights change each year
Paasche vs Laspeyres: Key Differences
| Feature | Paasche Index | Laspeyres Index |
|---|---|---|
| Weights Used | Current year quantities (Q₁) | Base year quantities (Q₀) |
| Formula | \( P_{01}^{P} = \frac{\sum P_1 Q_1}{\sum P_0 Q_1} \times 100 \) | \( P_{01}^{L} = \frac{\sum P_1 Q_0}{\sum P_0 Q_0} \times 100 \) |
| Inflation Bias | Tends to underestimate | Tends to overestimate |
| Data Requirements | Current quantity data needed | Only base year quantity data needed |
| Consistency | Less consistent (weights change) | More consistent (fixed weights) |