Economic History

Practical class #5

Ricardo Gouveia-Mendes

Undergraduate in Economics
1st Semester 2023-24

Today’s Class

  1. The Laspeyres Prices and Quantity Indexes
  1. The Paasche Prices and Quantity Indexes
  1. The Fisher Prices and Quantity Indexes
  1. Duality in Index Problems
  1. Problems with Index Numbers
    1. The Gerschenkron effect
    2. Historical comparisons
    3. International comparisons
  1. Exercises 9.1 and 9.2

Ernst Louis Étienne Laspeyres
(1834–1913)

Hermann Paasche (1851–1925)

Irving Fisher (1867–1947)

Alexander Gerschenkron (1904–1978)

The Big Mac Index

Roy Geary
(1896–1983)

Salem Khamis
(1919–2005)

Now, you know that…


  • Price indexes allow to remove the effect of inflation from economic data
  • Price indexes lead to over or under estimates for inflation
  • Quality improvements are captured as inflation by index numbers
  • Historical comparisons are very hard to compute
  • There some techniques to allow for international comparisons of living standards