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The GDP deflator is a weighted average of prices. The weight on each price reflects that...

The GDP deflator is a weighted average of prices. The weight on each price reflects that good’s relative importance in GDP. I don’t understand what the weight stands for.

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Answer #1

A weighted average can be more accurate than a simple average in which all numbers in a data set are assigned an identical weight.

In calculating a simple average, all numbers are treated equally and assigned equal weight. But a weighted average assigns weights that determine in advance the relative importance of each data point.

Likewise in weighted average price specific weight(importance) has given to each observation ( price) value to calculate the average.

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