Which of the following statements is true about price-weighted indexes?
I. The Laspeyres index uses base-period quantities as weights.
II. The Paasche index tends to underweight goods whose prices have gone down.
III. The Paasche index uses current-period quantities as weights.
A)I only
B)II only
C)I and III
D)II and III

Question

Which of the following statements is true about price-weighted indexes? 
I. The Laspeyres index uses base-period quantities as weights.
II. The Paasche index tends to underweight goods whose prices have gone down.
III. The Paasche index uses current-period quantities as weights.
A)I only
B)II only
C)I and III
D)II and III

Quizplus · Accepted Answer

The Laspeyres index indeed uses base-period quantities as weights, making statement I correct. The Paasche index uses current-period quantities as weights, which makes statement III correct. Statement II is incorrect as it does not accurately describe the weighting mechanism of the Paasche index.

Which of the Following Statements Is True About Price-Weighted Indexes