Paasche index more accurately provides a year-to-year comparison of the annual cost of selected products in the market-basket than Laspeyres index.

Question

Quizplus · Accepted Answer

The Paasche index uses current quantities and current prices to calculate changes in the cost of the market-basket from one year to another, making it more accurate for year-to-year comparisons. Laspeyres index, on the other hand, uses a fixed quantity and base year prices, making it better suited for comparing the cost of the market-basket over longer periods of time.

Paasche Index More Accurately Provides a Year-To-Year Comparison of the Annual