Statistics for Economics for Class 11 Chapter 8 Index Numbers

Statistics for Economics for Class 11 Chapter 8 Index Numbers

1. Index Numbers – An index number is a method of evaluating variations in a variable or group of variables in regard to geographical location, time, and other features. The base value of the index number is usually 100, which indicates price, date, level of production, and more.

There are various kinds of index numbers. However, at present, the most relatable is the price index number which mainly indicates the changes in the overall price level (or in the value of money) for a particular time. Therefore, the differences in the value of money are indicated by the differences in the overall price level for a specific time. Hence, the changes in the overall prices can be evaluated by a statistical device known as the ‘Index number.’

2. Base Period – When computing the index number for any statistical data, the base period is a must. The base period usually constitutes the data from the year for which the index numbers are going to be compared with. The base year should be a normal period, and periods in which extraordinary events have occurred should not be taken as base periods as they are not appropriate for general comparisons. Extreme values should not be selected as the base period. The period should not be too far from the past because a comparison with the current period cannot be made with such a base year as policies, economic and social conditions change with time. The base period should be updated periodically.

3. Current Period – According to OECD, the “current” period should refer to the most recent period for which an index has been computed or is being computed. However, the term is widely used to refer to any period that is compared with the price reference or index reference period. It is also widely used simply to mean the latter of the two periods being compared.

4. Price Index Numbers – Price index numbers compare and measure the price of certain goods.

5. Laspeyre’s Price Index – In statistics, the Laspeyres price index is used to measure the development of price for a basket of services and goods that are consumed in the base year. It helps to figure out how much the consumer consumed in the basket of goods and services in the base year that would cost in the current year. This is known as a fixed basket or fixed weight. An index number that utilises the basket of goods and services along with their weights from the base year/period is known as the ‘base-weighted index’.

6. Paasche’s Price Index – The Paasche price index is a composite index number of prices arrived at by the weighted sum method. This index number corresponds to the ratio of the sum of the prices of the actual period ‘n’ and the sum of prices of the reference period ‘0’, these sums being weighted by the respective quantities of the actual period.

7. Consumer Price Index – The Consumer Price Index (CPI) or market basket is an index used to calculate retail inflation in the country. It is one of the important tools to evaluate inflation and deflation.

The consumer price index is the measure of changes in the price level of a basket of consumer goods and services bought by households. CPI is a numerical estimation calculated using the rates of a sample of representative objects, the prices of which are gathered periodically.

8. Wholesale Price Index – The Wholesale Price Index (WPI) is an important index necessary for calculating inflation in a country. The wholesale price index represents the price of a basket of wholesale goods. WPI focuses on the price of goods that are traded between corporations. It does not concentrate on goods purchased by the consumers. The main objective of WPI is monitoring price drifts that reflect demand and supply in manufacturing, construction, and industry. WPI helps in assessing the macroeconomic as well as microeconomic conditions of an economy.

9. Index of Industrial Production – The Index of Industrial Production (IIP) is an index that indicates the performance of various industrial sectors of the Indian economy. It is calculated and published by the Central Statistical Organisation (CSO) every month. It is a composite indicator of the general level of industrial activity in the economy.

Central Statistical Organisation (CSO) has defined IIP as “It is a composite indicator that measures the short-term changes in the volume of production of a basket of industrial products during a given period with respect to that in a chosen base period.”

10. Sensex – Stock Exchange Sensitive Index (SENSEX) is the oldest stock exchange in India and is also termed BSE (Bombay Stock Exchange). It is a free float, economy-weighted index of 30 financially sound and very well-established organisations listed on BSE. These firms are also branded as blue chip companies in India. The 30 constituent corporations that are among the most successful and highest traded stocks are representatives of various industries in India. SENSEX mirrors the Indian stock market movements.

11. Human Development Index – The Human Development Index (HDI) is a single index measure that aims to record the three key dimensions of human development: access to knowledge, a decent standard of living, and long and healthy life. In other words, the human development index is practised to measure how development has improved human life.

We hope that the offered Statistics for Economics Index Terms for Class 11 with respect to Chapter 8: Index Numbers will help you.

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