Marshall-Edgeworth method uses both the current year as well as the base year prices and quantities. Marshall-Edgeworth Index can be computed using the following formula,
where Q0, Q1, P0 and P1 follow the usual notations.
Marshall-Edgeworth Index is simple to construct but suffers from the problems in data collection. However, the Marshall-Edgeworth index closely approximates the results obtained by the Fisher's Ideal index.