... since base year on the assumption that the expenditure pattern was the same in the year measured as in base year. Thus, only price is allowed to change and the index for the current period reflects this price. 2.2 Paasche Price Index Another weighted price index is the Paasche Price Index, which uses the current quantity weights and adjusts the base each time a new period is considered. It is a weighted aggregate price index that uses the quantities in the current year as the weights (Harper, 1991,p215). Paasche price index shows the changes assuming the expenditure pattern was the same in base year as in the year measured. 2.3 Advantages and Limitations Both the Laspeyres index and the Paasche index have advantages and limitations, as indicated following: 2.3.1 Advantages Laspeyres index * Easy to calculate. * The Laspeyres index is the more convenient to use on a continuing basis, because the weights of base year remain fixed. * It can ...

See this essay or coursework document in full right now