3.1 Price, quantity and value

The basic formula for index calculation is:

Price * Quantity = Value or P * Q = V

The basic elements of index calculation are prices, quantities and values. When two of these factors are known, it is always possible to count the third. For example, if the farmer who sells potatoes at the market knows how much money there is in his till and how many kilos of potatoes he has sold, he can calculate the average price.

On the other hand, if he knows the price and the amount of money in the till, he can count how many kilos of potatoes he has sold.

If the farmer knows the price of one kilo of potatoes and their quantity, he can count how much money he will be getting.

Value = Price * Quantity = 0.5 e/kg * 260 kg = 130 euros