Paasche index

Updated: Aug 20, 2021

An index number which measures the change in same aspect of a group of items over time using weights based on current rather than past values. For example, the Paasche price index finds the percentage increase of current prices, over prices at same base period, by dividing the total east of the current purchases made by consumers, at today’s prices, by the total east or those same purchases at the prices prevailing at the base date. Similarly, a Paasche quantity index finds the percentage increase of current quantities purchased, over quantities purchased at same base date, by dividing the total cost of the quantities currently purchased, valued at today’s prices, by the total cost or the quantities purchased at the base date, again valued at current prices. In the first of these examples, the weights used are current quantities purchased. In the second, the weights are current prices. A disadvantage of the Paasche index is that, because the weights are changing from year to year, comparison can only be made between any given year and the base year.

Reference: The Penguin Business Dictionary, 3rd edt.

Sources & references
Risk disclaimer
James Knight
Editor of Education
James is the Editor of Education for Invezz, where he covers topics from across the financial world, from the stock market, to cryptocurrency, to macroeconomic markets.... read more.