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Glossary Term
Laspeyres Index
Term
Laspeyres Index
Synonym
Related Term
Source of Definition
Short Definition
Statistical Activity
Inflation measures
Definition
The most commonly used index formula is the Laspeyres index which measures the change in cost of purchasing the same basket of goods and services in the current period as was purchased in a specified base period. The prices are weighted by quantities in the base period. The Laspeyres Index is practical and easy to interpret.
A variant of the basic calculation known as the Laspeyres price relative is used by many statistical agencies for the calculation of consumer price indexes. This method was adopted by New Zealand in the major revision of 1993 and is used in all aggregations above the calculation of regional price data. It produces the same results as the basic Laspeyres formula but offers greater flexibility in handling ongoing practical problems in the compiling of the index. The main advantage of this method is that quantities do not need to be calculated. Instead, expenditure data can be used directly in the index formula.
(c.f.
Paasche
,
Fisher Idea
l
,
MarshallEdgeworth
,
Tornqvist
indexes)
Formulae
Example
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