Price Index Numbers
1. Simple or Un-weighted Price Index Number
a) Simple Aggregative Method
Formula: P01 = (ΣP1 / ΣP0) × 100
Where:
P1 = Price in current year
P0 = Price in base year
b) Simple Average of Price Relatives (Arithmetic Mean)
Formula: P01 (AM) = Σ(P1/P0 × 100) / n = ΣP / n
Where:
P1/P0 × 100 = Price relative
n = Number of commodities
2. Weighted Price Index Number
Weighted price index numbers consider the quantity or weight of commodities.
a) Laspeyre’s Price Index (Base Year Method)
Formula: P01La = (ΣP1 q0 / ΣP0 q0) × 100
Where q0 = Quantity in base year
b) Paasche’s Price Index (Current Year Method)
Formula: P01Pa = (ΣP1 q1 / ΣP0 q1) × 100
Where q1 = Quantity in current year
c) Weighted Average of Price Relatives (Arithmetic Mean)
Formula: P01AM = (Σ [ W × (P1/P0 × 100) ]) / ΣW = Σ(WP)/ΣW
Where W = Weight of each commodity