{Wi Geometric Mean Method: In this method, the price index is constructed by taking the geometric mean of the price relatives of the items, The geometric mean may be simple or weighted. Thus, the price index (/p,,) using ‘simple geometric mean of price relatives is given by; <0) = [Px 100 oy ° . oS 1g ly = tn +2 = Again, the price index (Jp,) using-weighted geometric ‘mean of price relatives is given by, ay] Pa : “a ») Ton = 100 Pn fon = 5 oO Pn ‘r, logly, = er ‘he index number based on price relatives has the following two advantages over the aggregative method : [a] By definition, price relatives are independent ofthe units of measurement and hence, are pure numbers. Therefore, the price index obtained by averaging the price relatives is not affected by the units in which the Drices are quoted, {b] The price index computed by this method is not affected by the extreme items. © Construction of General Index from Group Indices The items induded In the constuction of price (or quanty) Index, number are sometimes cassifed under sont tae, categories called groups, such thet similar or related ves belong tothe same group, Then the into for each grove uadex is called a group: ha Bhan oe aa where J, is the group index of the nth corresponding group weight. 2H ouantity index Numbers We know that price index numbers measure the relative hanges in the price and permit comparison ofthe price of s10up and w, is the group of distinet but related ites j ‘a base year. Similarly, quantity ind corresponding price index numbers ns Po PY Mo 804 Ay BY Pys Mp ® Quantity index by simple x 100 Eqgu @ Laspeyres’ quantity index = ® Paasche's quantity index = @ Edgeworth-Marshall’s quantity —_ 2dn(Pn + Po) © 2 qg(Pn + Po) © Important Forn Upp fs the price per unit ofa commodity in Year), Py the price per unit of the commodi Current year), qy the quantity of a commodity Oth year, 4, the quantity consumed in the curren weight assigned to commodities and, the forthe nth yea with respect to the Oth year th © The price index number by simple ( ggregative method :Flig the tae eteg The the »] = Paty Bp 100 als price Index numer Zpa(40% An) EPal40* In) roy FpoC4o* An = 2PnlGoa, Pelton, index number = AM of Laspeyrey’ an | index numbers es index number = 1, Caleltonstrindermunie dy ee | ___ mide ene ona Of Lasperey and || coms | peony | “an new im. cen | ce Wei | index numbers: | ne \ Poe | Pe ee [Fish 130 = ~ | ae oil je ee 14209 | 1680 ‘ofthe commodity in the base yeat | method is given by, 2p, ‘number usi ‘AM ofthe relatives e sr using simple AM of the relatives | eee 494 109 = 1168 (approx) 0 346 | (4 Te index number ly, by weet serene Rea is given by, the number of commodities. Ms om a 1620 109 = 119 (approx) ighted AM of the Ton Spee 00 = 119 (one | sn below are the data on prices of some consumes 2, cnn a fe an ae gd ‘4998 = 100) using (i) ‘simple average and ( average of pricersiaves number using wei relatives | re group index Dn were J, 15" Ew, fr Deopland uw, 10,sbe corresponding BNP |