Items summed and averaged. The weights used may be either the amount spent on each item in the

current period (2004) — a current-weighted index, or Paasche index, or the amount spent on each

item in the base period (2000) — a base-weighted index, or Laspeyres index.

Commentary and Notes to Text 17.7.1.1

1. index number — числовой индекс (показатель)

2. weighted — взвешенный(-ое)

3. average — средняя величина

4. attribute — характерный признак (экономический)

5. retail prices index — индекс розничных цен

6. cost-of-living index — индекс прожиточного минимума

7. price index — ценовой индекс

8. relative prices — относительные цены

9. to multiply — умножать

10. current-weighted index — текущий взвешенный индекс

11. base-weighted index — взвешенный индекс, определяемый с учетом показателей базового

года

17.7.1.2. Read the text “Determining the Index Number.” On the grounds of the suggested method

make up your own example and relate it.

Determining the Index Number

When determining index numbers, we are faced with certain difficulties. This problem arises

from the use of index numbers, which are summary single numbers encapsulating a range of values

and used to describe succinctly changes in the range of values over time. The retail prices index, for

instance, could equally rationally, for the above purpose, be calculated as a base-weighted or*

current-weighted index, but the two types of index do not necessarily give the same answer. Far

instance, consider a simple example of two goods X and Y which have the following prices ani ;

quantities purchased in the base year 1 and the current year 2:

Year

Goods

Year 1 Year 2 1

Price Quantity Price Quantity 1

X Юр 5 8p 6 1

Y 20p 5 25p 1 1

The current-weighted index is given by:

(8p x 6) + (25p x l) 73

Year 2 = ----------------------- = —= 0.91 (Year 1 = 100)

(Юр x 6) + (20p x 1) 80

The base-weighted index is given by:

(8p x 5) + (25p x 5) 165

Year 2 = ----------------------- = — = 1.10 (Year 1 = 100)

(Юр x 5) + (20p x 5) 150

According to the base-weighted index, the general level of prices rose in year 2 compared with

year 1 (by 10 per cent), but according to the current-weighted index, prices fell in year 2 (by 9 per

cent).

248

Commentary and Notes to Text 17.7.1.2

1. Summary single numbers — суммарные числа (сводные)

2. to encapsulate = to enclose — заключать

3. a range of values — диапазон значений

4. succinctly — сжато, кратко

5. retail prices — розничные цены

6. a base-weighted index — базовый взвешенный индекс (показатель)

By comparative static equilibrium analysis the economists usually mean the analysis of markets

or economies in terms of their different equilibrium positions, without reference to the process by

which adjustment between equilibria is achieved. Most non-mathematical economics is static in

this sense. It consists of comparing diagrams which represent snapshots of the state of a market at

a single point in time, and it aims to assess the characteristics of the equilibrium state and discover

the position of a new equilibrium when some variable is changed. For example, most demand and

supply analysis is of this sort. An equilibrium is noted; then, the effect of a shift in demand or

supply is analysed; its impact on price and quantity sold is determined, and the effect of demand or

supply curves with different slopes can be assessed.

What is missing from such analysis is any trace of the path or speed of adjustment between

different equilibria. In perfect competition, for example, firms are assumed to have no influence

on price and be unable to deviate from the going market rate at all — yet, by what process can the

market price change? As there is no auctioneer telling everybody what price to set, the price-takers

themselves must also be the price-setters, even though this contradicts the basic assumption of the

model (tatonnement process). Comparative statics simply ignores problems such as these.

Commentary and Notes to Text 17.7.1.3