It differs from the Laspeyres index in that it uses current-period weighting. We are comparing the current year (observation year) prices to the base year prices at the same quantities.The Paasche Price Index is a price index used to measure the change in the prices and quantities of a This index corrects for the upward price bias of the Laspeyres Price Index and also takes into consideration consumption patterns. A surplus occurs when the consumer’s willingness to pay for a product is greater than its market price.The Network Effect is a phenomenon where present users of a product or service benefit in some way when the product or service is adopted by additional users. Below mentioned are some of the major advantages of its Ratio :Paasche Price Index is one of the key ratios in order to determine the velocity of Inflation in the Basket of Goods and Services.

Aggregate supply and aggregate demand are both plotted against the aggregate price level in a nation and the aggregate quantity of goods and services exchangedConsumer surplus, also known as buyer’s surplus, is the economic measure of a customer’s benefit. Ils représentent le montant nécessaire, dans la période courante, pour acheter un panier de biens et services choisi l'année de référence pour Laspeyres (durant la période courante pour Paasche), rapporté au coût de ce même panier acheté aux prix de l'année de référence. Determine the Paasche Price Index for Year 0, Year 1, and Year 2, using Year 0 as the base year.Therefore, the price index using the Paasche Price Index is as follows for each year:Note that in this index, the prices are the only items that change. It was invented by Let us take the below-mentioned Example to understand the Computation of the Paasche Index for a Commodity A, B & C.Below mentioned are the Steps to calculate Paasche Index.The calculation of the Paasche Price Index for Year 1.Paasche Price Index at Year 1 = {(30*30)+(40*35)+(50*40)} / {(10*30)+(20*35)+(30*40)}Paasche Price Index at Year 2 = {(60*40)+(70*45)+(80*50)} / {(10*40)+(20*45)+(30*50)}Hence we can observe the Inflation Impact in the Commodities the prices of Commodities A, B& C observed collectively have been increased by 341% at the end of year 2 and 195% at the end of year 1.Paasche Index is one of the most important tools to observe the Inflation in the basket of Goods and Services by comparing the Current Levels and Quantity available with the Base year prices. Paasche index, index developed by German economist Hermann Paasche for measuring current price or quantity levels relative to those of a selected base period.

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