Weighted index numbers are preferred over simple indices because they:
A. Account for the relative importance of different items in the basket
B. Are easier to calculate
C. Always satisfy the circular test
D. Do not require quantity data
Answer: Option A
Solution (By JKSSB Mock Tests)
Weighted indices assign weights (e.g., expenditure shares) to reflect the economic significance of items, providing a more realistic measure of overall change than simple indices that treat all items equally.
Explanation:
Fisher's index earns the 'ideal' label by mathematically satisfying two key consistency tests (time reversal and factor reversal), ensuring logical coherence in index number construction.
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