Question

Distinguish between:

Laspeyre's Index Number and Paasche's Index Number.

Answer 1

	Laspeyre’s Index Number	Paasche’s Index Number
Meaning	A distinctive feature of Laspeyre’s index number is that it uses a group of commodities purchased in the base year period as the basis of comparison.	Paasche's index number is distinguished by the fact that it compares a collection of commodities acquired in the current year period.
Formula	The formula for measuring Laspeyre’s index number is as follows: `"P"_{01} = (sum"p"_1"q"_0)/(sum"p"_0"q"_0) xx 100`	The formula for measuring Paasche’s index number is as follows: `"P"_{01} = (sum"p"_1"q"_1)/(sum"p"_0"q"_1) xx 100`