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The Bowley’s Price index number is represented in terms of :
- a)A.M. of Laspeyre’s and Paasche’s Price index number.
- b)G.M. of Laspeyre’s and Paasche’s Price index number.
- c)A.M. of Laspeyre’s and Walsh’s price index number.
- d)None of these.
Correct answer is option 'A'. Can you explain this answer?
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Most Upvoted Answer
The Bowleys Price index number is represented in terms of :a)A.M. of L...
Explanation:
Bowleys Price Index number is represented in terms of the arithmetic mean of Laspeyres and Paasches price index numbers. Let's understand what Laspeyres and Paasches price index numbers are.
Laspeyres Price Index Number:
The Laspeyres price index number measures the change in the price of a fixed basket of goods and services over time. It is calculated by taking the ratio of the cost of the basket of goods and services in the current year to the cost of the same basket of goods and services in the base year. The Laspeyres price index number overestimates the cost of living because it does not take into account the substitution effect.
Paasches Price Index Number:
The Paasches price index number measures the change in the price of a variable basket of goods and services over time. It is calculated by taking the ratio of the cost of the basket of goods and services in the current year to the cost of the same basket of goods and services in the base year. The Paasches price index number underestimates the cost of living because it does not take into account the income effect.
Bowleys Price Index Number:
Bowleys Price Index Number is the arithmetic mean of Laspeyres and Paasches price index numbers. It overcomes the limitations of both Laspeyres and Paasches price index numbers because it takes into account the substitution effect as well as the income effect.
Conclusion:
Thus, the correct answer is option 'A' - Bowleys Price index number is represented in terms of A.M. of Laspeyres and Paasches Price index number.
Bowleys Price Index number is represented in terms of the arithmetic mean of Laspeyres and Paasches price index numbers. Let's understand what Laspeyres and Paasches price index numbers are.
Laspeyres Price Index Number:
The Laspeyres price index number measures the change in the price of a fixed basket of goods and services over time. It is calculated by taking the ratio of the cost of the basket of goods and services in the current year to the cost of the same basket of goods and services in the base year. The Laspeyres price index number overestimates the cost of living because it does not take into account the substitution effect.
Paasches Price Index Number:
The Paasches price index number measures the change in the price of a variable basket of goods and services over time. It is calculated by taking the ratio of the cost of the basket of goods and services in the current year to the cost of the same basket of goods and services in the base year. The Paasches price index number underestimates the cost of living because it does not take into account the income effect.
Bowleys Price Index Number:
Bowleys Price Index Number is the arithmetic mean of Laspeyres and Paasches price index numbers. It overcomes the limitations of both Laspeyres and Paasches price index numbers because it takes into account the substitution effect as well as the income effect.
Conclusion:
Thus, the correct answer is option 'A' - Bowleys Price index number is represented in terms of A.M. of Laspeyres and Paasches Price index number.
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Option A
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The Bowleys Price index number is represented in terms of :a)A.M. of Laspeyres and Paasches Price index number.b)G.M. of Laspeyres and Paasches Price index number.c)A.M. of Laspeyres and Walshs price index number.d)None of these.Correct answer is option 'A'. Can you explain this answer?
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The Bowleys Price index number is represented in terms of :a)A.M. of Laspeyres and Paasches Price index number.b)G.M. of Laspeyres and Paasches Price index number.c)A.M. of Laspeyres and Walshs price index number.d)None of these.Correct answer is option 'A'. Can you explain this answer? for CA Foundation 2024 is part of CA Foundation preparation. The Question and answers have been prepared according to the CA Foundation exam syllabus. Information about The Bowleys Price index number is represented in terms of :a)A.M. of Laspeyres and Paasches Price index number.b)G.M. of Laspeyres and Paasches Price index number.c)A.M. of Laspeyres and Walshs price index number.d)None of these.Correct answer is option 'A'. Can you explain this answer? covers all topics & solutions for CA Foundation 2024 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for The Bowleys Price index number is represented in terms of :a)A.M. of Laspeyres and Paasches Price index number.b)G.M. of Laspeyres and Paasches Price index number.c)A.M. of Laspeyres and Walshs price index number.d)None of these.Correct answer is option 'A'. Can you explain this answer?.
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