Weighted aggregative price index
Topic: Inflation and Index Numbers: CPI, WPI, IIP and the Deflator · NCERT: Class 11, Ch 7 "Index Numbers"
Meaning
A weighted aggregative price index prices the same fixed basket of goods in two periods and compares the totals.
Formula: Σp₁q / Σp₀q × 100
The quantities (q) stay the same in both periods, so any change in the basket's value comes only from prices. If base-year quantities are used, it is the Laspeyres index. If current-year quantities are used, it is the Paasche index.
Example
A consumer buys 90 kg of rice and 5 pieces of cloth. In 2000 (rice ₹10/kg, cloth ₹100/piece), the basket cost ₹1,400. In 2005 (rice ₹15, cloth ₹120), the same basket cost ₹1,950. The index is 1,950/1,400 × 100 = 139.29.
Don't confuse with
- Weighted index of price relatives: it first converts each price into a relative (p₁/p₀ × 100), then averages the relatives using expenditure-share weights. It does not sum values in rupees.
Related concepts
- Index number
- Price index
- Quantity index
- Simple aggregative price index
- Weighted index
- Laspeyres price index
- Paasche price index
- Price relative
- Method of averaging relatives
- Weighted index of price relatives