The index number that is computed after assigning due weightage to different items under study is called weighted index number. In such a case, weights are assigned in an explicit manner either on the basis of the quantities, or on the basis of the values of the items consumed, or on any other rational basis. The formula for computing this index number is as follows:
P01(w) = ∑IW/∑W or ∑IV/∑V
Where, P01(w) = Weighted price index of the current year on the basis of its base year price
I = Index, or price relative i.e., (P1/P0) X 100
W = Weight assigned.
V = Value of the items in the base year i.e., P0 × q0