Calculate Laspeyre’s and Paasche’s price indices for the year 1980 from the following data. Prove that both the formulae do not satisfy the Time Reversal Test.

Question: Calculate Laspeyre’s and Paasche’s price indices for the year 1980 from the following data. Prove that both the formulae do not satisfy the Time Reversal Test.

laspeyre homework

Solution: Computation of Laspeyre’s and Paasche’s indices

Paasche's indedx

Thus, Paasche’s indedx also does not satisfy the Time Reversal Test

View another question