Editing Price index (section)

==== Paasche index ====
Introduced in 1874 by [[Hermann Paasche]],<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 current-period quantities:

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

It understates inflation by assuming consumers instantly adjust to new quantities, ignoring that higher prices might reduce demand over time. For example, a Paasche index of 1 indicates the consumer could have consumed the same bundle in the base period as in the current period, given unchanged income.