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. Laspeyres understates, Paasche overstates

C. Both overstate

D. Laspeyres tends to overstate price increase, Paasche understates

Answer: Option D

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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Practice More Statistics Questions

Question #1

If P(A)=0.4, P(B)=0.5, and P(A∩B)=0.2, then P(A'∩B') is:

A. 0.5

B. 0.3

C. 0.1

D. 0.7

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Correct Answer: Option B

Explanation:
P(A∪B)=0.4+0.5-0.2=0.7. P(A'∩B')=1-0.7=0.3.

This question belongs to: Accountancy and Statistics Statistics

Question #2

Assertion (A): Association between attributes does not imply causation. Reason (R): Two attributes may be associated due to a third confounding variable or chance.

A. A is false but R is true

B. Both A and R are true, but R is not the correct explanation of A

C. Both A and R are true, and R is the correct explanation of A

D. A is true but R is false

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Correct Answer: Option C

Explanation:
Statistical association indicates a relationship but not causality; confounding factors or random variation can create spurious associations, necessitating careful interpretation beyond correlation.

This question belongs to: Accountancy and Statistics Statistics

Question #3

The total of all frequencies in a frequency distribution is equal to the:

A. Class mark of the last class

B. Mean of the frequencies

C. Width of the highest class

D. Highest cumulative frequency

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Correct Answer: Option D

Explanation:
In a 'less than' cumulative frequency distribution, the final cumulative frequency equals the total number of observations (N).

This question belongs to: Accountancy and Statistics Statistics

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