The 'bias' in Laspeyres and Paasche price indices is that: MCQ with Answer and Explanation

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The 'bias' in Laspeyres and Paasche price indices is that:

A. Both understate

B. Both overstate

C. Laspeyres tends to overstate price increase, Paasche understates

D. Laspeyres understates, Paasche overstates

Answer: Option C

Solution (By JKSSB Mock Tests)

Laspeyres uses base period basket, ignoring substitution, so it overstates; Paasche uses current basket, often understating.

This question belongs to: Accountancy and Statistics Statistics

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Correct Answer: Option A

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This question belongs to: Accountancy and Statistics Statistics

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Correct Answer: Option B

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This question belongs to: Accountancy and Statistics Statistics

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