Editing Price index (section)

==== Jevons index ====
By W.S. Jevons (1863), a geometric mean:<ref>PPI manual, 602.</ref>

: <math>P_{J} = \left(\prod \frac{p_{t}}{p_{0}}\right)^{1/n}</math>

It’s the unweighted geometric mean of price relatives. It was used in an early [[Financial Times]] index (the predecessor of the [[FTSE 100 Index]]), but it was inadequate for that purpose because if any price falls to zero, the index drops to zero (e.g., one free item nullifies the cost). That is an extreme case; in general, the formula will understate the total cost of a basket of goods (or any subset) unless their prices all change at the same rate. Also, as the index is unweighted, large price changes in selected constituents can transmit to the index to an extent not representing their importance in the average portfolio.<ref>PPI manual, 596.</ref>