Question:
Marshall and Edgeworth price index number utilizes the weights as:
Marshall and Edgeworth price index number utilizes the weights as:
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Marshall-Edgeworth's formula uses \( (q_0+q_1) \) as the weight in both numerator and denominator.
Updated On: Jul 4, 2026
- Quantities of the base year
- Quantities of the current year
- Quantities of both base and current years
- Prices of both base and current years
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The Correct Option is C
Solution and Explanation
Step 1: The Marshall-Edgeworth index number formula is \[ P_{01} = \frac{\sum p_1 (q_0 + q_1)}{\sum p_0 (q_0 + q_1)} \times 100 \]
Step 2: Here the weight attached to each commodity is \( (q_0 + q_1) \), the sum of its base year quantity \(q_0\) and its current year quantity \(q_1\), rather than either quantity alone.
Step 3: This is designed to remove the one sided bias of Laspeyre's (only \(q_0\)) and Paasche's (only \(q_1\)) formulas by averaging the quantity weights from both periods.
Step 4: So Marshall-Edgeworth's index uses quantities of both the base year and the current year as weights.
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