Laspeyres Index

Laspeyres Index is a method used to measure price changes over time by evaluating a fixed set of goods and services. It compares the total cost of purchasing this basket at current prices to the cost at base-period prices. This index helps track inflation and cost of living adjustments by focusing on consumer expenditure patterns from the base period. It does not reflect changes in consumption behavior or substitution effects, which can be a limitation. Despite this, it is widely used for its simplicity and historical relevance in economic analysis.