Editing Price index (section)

== Basic formula ==
Price indices measure relative price changes using price (<math>p</math>) and quantity (<math>q</math>) data for a set of goods or services (<math>C</math>). The total market value in period <math>t</math> is: :<math>\sum_{c \in C} (p_{c,t} \cdot q_{c,t})</math> where <math>p_{c,t}</math> is the price and <math>q_{c,t}</math> the quantity of item <math>c</math> in period <math>t</math>. If quantities remain constant across two periods (<math>q_{c,t_n} = q_{c,t_0} = q_c</math>), the price index simplifies to: :<math>P = \frac{\sum (p_{c,t_n} \cdot q_c)}{\sum (p_{c,t_0} \cdot q_c)}</math> .

This ratio, weighted by quantities, compares prices between periods <math>t_0</math> (base) and <math>t_n</math>. In practice, quantities vary, requiring more complex formulas.<ref name="hill22">Peter Hill. 2010. "Lowe Indices", chapter 9, pp. 197–216 in W.E. Diewert et al., ''[http://www.indexmeasures.ca/Vol6_10,09,26.pdf Price and Productivity Measurement: Volume 6]''. Trafford Press</ref>