Fisher’s ideal index number is

The correct answer is: C. Geometric mean of Laspeyre’s and Paasche’s index

Fisher’s ideal index number is the geometric mean of Laspeyre’s and Paasche’s index numbers. It is a weighted average of the two index numbers, with the weights being the shares of the two groups in the total expenditure.

Laspeyre’s index number is a price index that uses the prices of a base period to weight the quantities of the current period. Paasche’s index number is a price index that uses the quantities of the current period to weight the prices of the base period.

The geometric mean of two numbers is the square root of their product. In the case of Fisher’s ideal index number, the geometric mean is the square root of the product of Laspeyre’s and Paasche’s index numbers.

Fisher’s ideal index number is considered to be the most accurate price index because it takes into account both the prices and quantities of goods and services. It is also the most widely used price index.

Here is a brief explanation of each option:

• Option A: Arithmetic mean of Laspeyre’s and Paasche’s index. The arithmetic mean is the sum of two numbers divided by 2. In the case of Fisher’s ideal index number, the arithmetic mean would be the sum of Laspeyre’s and Paasche’s index numbers divided by 2. The arithmetic mean is not as accurate as Fisher’s ideal index number because it does not take into account the weights of the two groups.
• Option B: Harmonic mean of Laspeyre’s and Paasche’s index. The harmonic mean is the reciprocal of the arithmetic mean of the reciprocals of two numbers. In the case of Fisher’s ideal index number, the harmonic mean would be the reciprocal of the arithmetic mean of the reciprocals of Laspeyre’s and Paasche’s index numbers. The harmonic mean is not as accurate as Fisher’s ideal index number because it does not take into account the weights of the two groups.
• Option D: None of the above. None of the other options are correct.