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Chain price index Picture: MBA Lectures

Chain price index

A price index that is obtained from the combination of partial indices which refer to the previous time periods and permit the weighting scheme to vary from period to period. Consequently, a comparison of prices between 0 and t is indirectly produced as the product of the subindices for each period, and not directly using data only from periods 0 and t. The motivation for allowing the weights to change is to accommodate the continuous introduction of new commodities.

Reference: Oxford Press Dictonary of Economics, 5th edt.