Editing Price index (section)

==== Laspeyres index ====
Developed in 1871 by [[Étienne Laspeyres]],<ref>{{Cite web |title=Q&A about the Consumer Price Index |url=http://www.stat.go.jp/english/data/cpi/1587.htm}}</ref> it uses base-period quantities:

: <math>P_L = \frac{\sum (p_{c,t_n} \cdot q_{c,t_0})}{\sum (p_{c,t_0} \cdot q_{c,t_0})}</math>

It measures the cost of a fixed <math>t_0</math> basket at new prices. This often overstates inflation because it does not account for consumers reacting to price changes by altering quantities purchased (e.g., substituting cheaper goods when prices rise). For example, when applied to an individual consumer’s bundle, a Laspeyres index of 1 means the consumer can afford to buy the same bundle in the current period as consumed in the base period, assuming income hasn’t changed.<ref>Statistics New Zealand; ''Glossary of Common Terms'', [http://www2.stats.govt.nz/domino/external/omni/omni.nsf/wwwglsry/paasche+index "Paasche Index"] {{Webarchive|url=https://web.archive.org/web/20170518063121/http://www2.stats.govt.nz/domino/external/omni/omni.nsf/wwwglsry/paasche+index|date=2017-05-18}}</ref>