Unweighted aggregate price indexes account for differences in the magnitude of prices per unit and differences in the consumption levels of the items in the market basket.

Question

Quizplus · Accepted Answer

Unweighted aggregate price indexes only account for differences in the magnitude of prices per unit, but not for differences in the consumption levels of the items in the market basket. This can lead to misleading conclusions about changes in overall prices if the consumption patterns vary significantly over time or across different groups of consumers. Weighted aggregate price indexes are preferred as they reflect both the relative prices and quantities of the goods in the market basket.

Unweighted Aggregate Price Indexes Account for Differences in the Magnitude