Introduction

In this scenario, we are given Bowley's index number as 150 and Fisher's index number as 149.95. We are required to calculate Paasche's index number and explain the concept behind it.

Explanation

To calculate Paasche's index number, we need two sets of data: the current period data and the base period data. The formula for calculating Paasche's index number is:

Paasche's Index = (Current Period Price * Current Period Quantity) / (Base Period Price * Current Period Quantity)

Calculating Paasche's Index Number

Given that Bowley's index number is 150, it represents the average of the price relative and quantity relative. Therefore, we can assume that Bowley's price relative and quantity relative are both equal to 150.

Price Relative
Bowley's price relative = 150

Quantity Relative
Bowley's quantity relative = 150

Now, let's calculate Paasche's index number using the formula mentioned above.

Paasche's Index = (Current Period Price * Current Period Quantity) / (Base Period Price * Current Period Quantity)

Since the current period quantity cancels out, the formula simplifies to:

Paasche's Index = Current Period Price / Base Period Price

Substituting the values, we have:

Paasche's Index = 150 / 150

Paasche's Index = 1

Therefore, Paasche's index number is 1.

Conclusion

In summary, Paasche's index number is calculated by comparing the current period price to the base period price. In this scenario, since Bowley's index number is 150, we can assume that Bowley's price relative and quantity relative are both equal to 150. Using this information, we calculated Paasche's index number to be 1.

Option A- 158