Paasche Index

The Paasche index is calculated by the division between the money amount in current prices (current price multiplied by current quantity) needed to purchase a basket of goods whose quantities were fixed in the current period (actual) and the amount of money needed for the same basket at base prices (base price multiplied bu the current quantity).

    \[ I_Paasch = \frac{\sum P_t * Q_t }{\sum P_0 * Q_t } \]

where:

IPaasch= Paasche index

Pt = price of the goods on period “t” (current/actual).

Qt = quantity of goods on period “t” (current/actual).

Po = price of the goods on period zero (base).

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