Statistics

Index number

1. What is index number ?

Index number is defined as the number through which we can express the relative change of price, quality or value of anything in the current period on the basis of a certain period. It is generally denoted by –
0I1

Here,I = Index number.
0 = Base year.
1 = Current year.
Generally Index number express the economic condition of any country .Thus it is called economic barrow metre.Also we say that Index number represents the general level of magnitude of the changes between two or more situation of a number of variable taken as a whole.

2. What are types of Index number?

There are 3 types of Index number. These are given below-

• Price Index number: - An Index number by which the relative change in price of anything in the current year to the base year is expressed by the price index number.
• Quality Index number :- An Index number by which the relative change in quality of anything in the current year to the base year is expressed by the quality index number.
• Value Index number :- An Index number by which the relative change in value of anything in the current year to the base year is expressed by the value index number.

What are the usages of Index number ?

Index number are vital tools of economic and business analysis. There significance can be discussed by the following points-

• Forming suitable policies- Index number helps to take the suitable policies.Many of the economic and business polices are guided by the Index number.
• Express trends and tendencies :- Index number are widely used in measuring changes over a period of time and the time series enable us to study the general trend of the phenomenon / occurrence.
• Useful in adjustment :- Index number are used to adjust the change with the original data.

3. What are the problems in construction of Index number ?

There are some problems in construction of Index number.These are given below –

• Purpose of Index number :- Every Index is limited and particular use. There is no all purpose index.Such as a price index only measure the consumer’s prices not included the wholesale prices.
• Availability and comparability of data :-
• S
• S
• P
• C
• S

4. What are the Methods of constructing Index number?

All methods can be grouped into two heads.Such as –
a) Unweighted Index number
b) Weighted Index number