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Prof.Irving Fisher has given a number of formulae for constructing index number and of these he calls one as the ‘ideal’ index.

It is known as ‘ideal’ because of the following reasons:

1.It is based on the geometric mean which is theoretically considered to be the best average for constructing index numbers. 

2.It takes into account both current years as well as base year prices and quantities. 

3.It satisfies both the time reversal test as well as the factor reversal text as suggested by Fisher. 

3.  IT is free from bias. The two formulate that embody the opposing types and weight biases are, in the ideal formula, crossed geometrically.