Divisia and Frisch are friends

Divisia indexes and the less-well-known Frisch counterparts both involve weighted logarithmic changes of prices/quantities. This paper shows how they can be used in tandem to understand interesting aspects of consumer behaviour. The indexes can be used for measurement of quality and its price; the estimation of the income elasticity of the marginal utility of income, which is related to the overall degree of substitution among goods in the consumer’s basket; and for the analysis of the bias in the consumer price index due to the neglect of substitution effects. In this sense, Divisia and Frisch (indexes) are friends.