- Actual market price applies to the entire product and its components, this is the basic price of the product, including the manufacturer's profit and minus the customer discount.
5. Manufacturing cost method
Often there are no separate prices for each independent part of the product, as in the case of option pricing, in which case the price statisticians must ask the exporter about the cost of producing the independent parts. In order to eliminate the quality difference between the two products when calculating the price index, in addition to the price information of each part, the statisticians also collect information about the difference in production costs of the two products. In this method, cost information is used instead of price information, so the method does not take into account consumer preferences.
6. Price index and unit value index
When eliminating price fluctuations in an indicator, statisticians often use the price index as a tool and the method applied is called the price index method. However, in some cases when there is no price index, the unit value index is used as an alternative tool, such as for some service industries. What are the characteristics of the price index and the unit value index, and can they be used interchangeably to eliminate price fluctuations in national accounts statistics?
The price index of a group of products is calculated based on the prices of a representative sample of the entire group, fixed for two periods. The quality of the price index depends on the high or low representativeness of the sample of products for which prices are taken. If the sample of products does not include popular products on the market and the prices of products not included in the sample differ significantly from the prices of products in the sample, the price index will be inaccurate and misleading. In order for the price index to accurately reflect the price fluctuations of products on the market, the sample of products selected for price taking must be updated to remove products that are no longer available on the market and include new products in the sample.
The unit value index of a product group is calculated based on the observation of the total quantity and total value of the group. The unit value of a product group is calculated as the ratio of the total value of the group to the total quantity of products in the group, the unit value index is calculated as the ratio of the unit values of two periods and can be used to
Evaluate price trends of entire product groups.
The unit value index has the advantage of observing all products in the group, but it has the problem of heterogeneity of products, which is the cause of quite large fluctuations in the unit value index. The second disadvantage of the unit value index is that changes in the structure of products in the group affect the unit value index and lead to changes in the price factor, although in reality these changes
This change is a change in volume. The third disadvantage of the unit value index is that it does not allow for adjustment for changes in product quality. In other words, the unit value index differs from the price index of goods in that changes in the unit value index include changes in the quality of the goods, while changes in the price index are due entirely to pure changes in the prices of the goods . To illustrate the disadvantage
This point of the unit value index, the author gives the following example:
Suppose in the footwear product group there are two products shoes and sandals with price and quantity data in year t and year t+1 as follows:
DÐp
Price
Basket value
Shoes
Year t
15
10
150
Year t +1
10
10
100
10 | 15 | |
Price | 20 | 20 |
Basket value | 200 | 300 |
Count | ||
Se leung | 25 | 25 |
Unit value basket | 14 | 16 |
Basket value | 350 | 400 |
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From the data given in the table, the following results can be calculated:
- Unit value index of year t+1 compared to year t is 114.3;
- The mass index is based on a unit value index of 100 (the total quantity of shoes and sandals remains unchanged);
- The Paasche price index of year t+1 compared to year t is 100;
I P p = PtQt / PoQt = (20 x15 + 10 x 10) / ( 20 x 15 + 10 x 10)
- The Laspeyres mass index of year t+1 compared to year t is 114.3; I L q = PoQt / PoQo = (20 x15 + 10 x 10) / ( 20 x 10 + 10 x15).
In which: I P p - Price index according to Paasche;
IL q - Laspeyres mass index.
It is clear that the prices and quantities of the two products remain unchanged, only the quantity structure of the two products has changed, which is accurately reflected in the price index calculated according to Paasche (100) and the volume index calculated according to Laspeyres (114.3). On the contrary, the unit value index reflecting the price fluctuation trend of the whole group of products is 114.3 and the volume index based on the unit value index is 100. If the unit value index is used as a tool to eliminate the price fluctuation factor, it tends to exaggerate the price change (in this example, the price is unchanged) and underestimate the actual change in quantity.
This is the reason why statisticians do not use the unit value index as a tool to eliminate price fluctuations. The unit value index will accurately reflect price fluctuations if the product group is homogeneous and the structure of products within the group does not change.
7. Price index and deflator
The deflator is also a tool used to calculate GO of product industries at comparable prices using the price index method. Below, the author briefly mentions this type of index.
The deflator is a concept that represents the general price level fluctuation of the indicator, calculated by the ratio of the value between the current price and the comparison price of the indicator.
For example, the GDP deflator reflects changes in the prices of all goods and services produced in the economy, calculated using the following formula:
GDP at current prices of year t
GDP deflator for year t
= ----------------------------------------------
GDP at constant prices of year t
x 100
The GDP deflator is often used to eliminate the effects of changes in the general price level in relevant economic indicators. With the general concept of the deflator, in addition to the GDP deflator, national accounts statistics also calculate the following types of deflator:
Final household expenditure
end use of household
Spending deflator= | family at current prices of year t ---------------------------------------------- | x | 100 | |
family of the year | Final household expenditure family at comparable prices of year t | |||
Spending deflator | Final government expenditure at current prices of year t | |||
end use of the House water of the year | = | ------------------------------------------- Final government expenditure at constant prices of year t | x | 100 |
Value deflator | Production value of the product industry at current prices of year t | |||
production of the manufacturing industry product of the year | = | ------------------------------------------- Production value of the product industry at comparable prices of year t | x | 100 |