If the Paasche quantity index exceeds 1, then:
A)both consumption bundles are equally preferred.
B)the consumption bundle in period 0 is preferred to that of period 1.
C)the consumption bundles cannot be compared.
D)the consumption bundle in period 1 is preferred to that of period 0.

Question

Quizplus · Accepted Answer

A Paasche quantity index greater than 1 indicates that the current period consumption bundle (period 1) is preferred to the base period consumption bundle (period 0). Therefore, choice D is the correct answer.

If the Paasche Quantity Index Exceeds 1, Then