7. Prices and price indices

Thus far we have assumed that the elements of vector P express the number of monetary units for each physical unit of production. The same equations are also used for finding indices of transformation from the prices currently prevailing in the national economy to computed prices. Let us call P° current (empirically given) prices, P^{1} calculated prices, and P^{i } price indices. If P° > 0, then P^{i} can be defined:
This equation can be written ( P^{^}°)^{1}P^{1}_{ }= (1 + n*)( P^{^}°)^{1}A'P^{^}°( P^{^}°)^{1}P^{1}_{ } Considering eqs. (36) and (37) we can write P^{i}_{ }= (1 + n*)A°'P^{i}_{ } _{ }

If we use matrices expressed in prices P°, instead of those expressed in physical terms, we can calculate price indices P^{i} for all types of prices by this same method. Note that a different interpretation of the normalizing condition (35) is required when we calculate price indices. We require, for instance, that the volume of the gross social product .~‘, expressed in prices P°, be the same as in prices P^{1}: XP^{1 } = XP^{0}.
we can, again, write this condition VP^{i} = 1.




