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SSC Statistics QUESTION #2011
Question 1
Fisher's Ideal price index is preferred over Laspeyres' and Paasche's indices because it:
  • Uses only base period data
  • Is always equal to 100 in the base year
  • Satisfies both the time reversal test and the factor reversal test✔️
  • Is easiest to compute
Correct Answer Explanation
Fisher's Ideal index \(= \sqrt{L \times P}\) (geometric mean of Laspeyres' and Paasche's) satisfies the time reversal test (\(I_{01} \times I_{10} = 1\)) and the factor reversal test (\(P_{01} \times Q_{01} = V_{01}\)), making it the most theoretically sound index. Neither Laspeyres' nor Paasche's alone satisfies both tests.