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Composite Commodities: Laspayre’s and Paasche Indices

Summary:
bit.ly/dsia04d – Part D of Lecture 4 on Descriptive Statistics: An Islamic Approach – A price index is a the price of a composite commodity, which is a particular basket of goods. Inflation can be measured by price changes of this composite commodity. How do we choose proportions of goods within the composite commodity. Laspayre ...

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bit.ly/dsia04d – Part D of Lecture 4 on Descriptive Statistics: An Islamic Approach – A price index is a the price of a composite commodity, which is a particular basket of goods. Inflation can be measured by price changes of this composite commodity. How do we choose proportions of goods within the composite commodity. Laspayre and Paasche indices are based on using aggregate consumption pattern in the past and the present as the weights in the consumption bundle. However, there are many other reasonable possibilities. Instead of the aggregate level, it makes more sense to look at consumption patterns of specific households to construct composite goods for price index and inflation.


Asad Zaman
Physician executive. All opinions are my personal. It is okay for me to be confused as I’m learning every day. Judge me and be confused as well.

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