Monday, October 20, 2008

Why Fisher Index number is So Ideal Index Number

Fisher has discovered weighted index number in which he try to calculate best index number because he has taken both current and past years quantity as the base of price index number.
The main quality of fisher index number is that it qualify both time reversal test and factor reversal test.
  • Time reversal test means
P01 X P10 = 1 , It means if we changes time of fisher formula current period into base year and base year in to current year and when we multiply both index number it must equal to 1.
  • Factor reversal test

If we changes price into quantity and quantity into price.Then we calculate index and then we multiply , it must equal to value Index. Fisher pass this test

So above reason fisher index is best.

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