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price index


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A measure of the value of money in which the cost of a standard collection, or basket, of goods and services at some particular date is compared with the cost of the same basket at a base date. The basket is chosen to represent the expenditure of a typical household at the date under consideration.

Writing p0j and pnj as the prices at times 0 and n of the jth item in the basket, and q0j and qnj as the corresponding quantities of that item, the Laspeyres price index, suggested by Laspeyres in 1871, is the ratio and the Paasche price index, suggested by Paasche in 1874, is the ratio In 1922 Irving Fisher suggested using the geometric mean: This is now known either as the Fisher index or as the ideal index. An alternative, variously known as the Bowley index, or the Marshall–Edgeworth index, is See also retail price index.

Subjects: Economics — Probability and Statistics.


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