Which of the following statements is true about the Laspeyres and Paasche indices?
A) As long as the evaluation period is the same, the two indices usually yield the same value.
B) The difference in the values of the two indices, if any, can usually account for the varying price levels across periods.
C) The Laspeyres price index uses the current period quantities as weights, as opposed to the base period quantities used by the Paasche price index.
D) The greater the length of time between periods, the higher the chances of variation between the values of the two indices.

Question

Quizplus · Accepted Answer

The Laspeyres price index uses base period quantities as weights, while the Paasche price index uses current period quantities as weights. This difference in weighting can lead to variations in the indices, especially as the time between the base and current periods increases, due to changes in consumption patterns or the introduction of new goods and services.

Which of the Following Statements Is True About the Laspeyres