# Laspeyre and Paasche index numbers Example 3

1. says

Sir i did not get the point, y isn’t it fair in paashe to compare the prices of same quantities in the previous and the current year?
Why can’t we say that last time we got this much quantity for this much(\$) and this year ….

• says

Or sir I didnt catch the 2nd disadv. Of paasche correctly, plz kindly elaborate it can you?

• says

We can compare this year and last year. However we cannot compare a series of Paasche index numbers because every year is a different quantities.

2. says

Hello Sir. I understood the whole thing but could not understand the arithmetic you did in test No. 4.
Could you please explain it to me in a detailed arithmetic way..
thank you..

• says

(In future, if you want me to answer a question then please ask in the F2 Ask the Tutor F2 Forum. I am not always able to read all the comments beneath the lectures.)

For every \$185 spent in 2009, it would cost \$220 in 2011.

So, for 32,000 spend in 2009, we would need to spend 220/185 x 32,000 in 2011. This is for 20,000 kg and so divide by 20,000 to get the cost per kg.

To get the cost of 13,000 kg in 2011, just multiply the cost per kg in 2011 by 13,000.

3. says

Could you please tell me how to use the index number for manager? make a good plan? but in what factors? the selling costs?the produce costs? would the manager increase a employee’s salary? I do want to know more…
And what the index number can do for the government? Is there a way to forecast the index number for next year?

• says

@gahraman, If you look at the ACCA Study Guide for Paper F2 (attached to the syllabus) it is sections 2(m) and 2(n).
Maybe you are looking at an old syllabus.

(We would not include something in our Course Notes and lectures if it was not in the syllabus )

4. says

Is there another formula we could use for question above? (new basket of goods)

5. says

Thank you for the wonderful lecture Open tuition.
Question on using paasche – if a new basket of goods is selected in a period with one product that was not available in the base year, what do we do about Po? (lets say coffee, tea and iphones for current year and base year was coffee, tea and sugar). Would they ever ask us such a question?

• says

@smaguti, No – they would not ask such a question (and that is one of the problems with Paasche)