Final answer:
The Paasche's formula for constructing the price index number is the sum of current period prices and quantities divided by the sum of base period quantities priced at current period prices, multiplied by 100.
Step-by-step explanation:
The formula to construct the price index number using the Paasche's formula is Sum of (p1q1) divided by Sum of (p0q1), where p1 are the current period prices, q1 are the current period quantities, p0 are the base period prices, and q0 are the base period quantities. To use the formula correctly, the resulting figure should be multiplied by 100 to convert it into an index form that is usually published. So, after calculating the index value by the formula, it should be multiplied by 100 to attain a whole number representation like 100, 125, or 85, which can then be used to deflate nominal figures to real figures. This deflating is done by dividing the nominal value by the price index and then dividing by 100 again to correct for the initial multiplication.