Discussion
Which of the following satisfy time reversal test but not factor reversal test ?
Answer: D
Of the indices listed, the Marshall-Edgeworth index number satisfies the time reversal test but not the factor reversal test, the fourth option. Fisher's ideal index satisfies both tests, while the Laspeyres and Paasche indices satisfy neither, since each of them uses the weights of only one of the periods. The Marshall-Edgeworth index uses the average of the quantities of the two periods as weights, which makes it reversible in time, but the product of its price and quantity indices does not equal the value ratio.
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