Important Questions for Index Numbers

Important questions with answers for index numbers are drafted by expert commerce teachers from the latest version of CBSE (NCERT) books.

Important Questions – Index Numbers

Question 1

Define index number.

Answer:

An index number is a mathematical measure outlined to explain changes in a group of related variables or just a variable considering the time, characteristics, and geographical location.

Question 2

What is a simple index number?

Answer:

A simple index number is an index number in which all the items of the series are accorded an equal weightage or importance.

Question 3

Define weighted index number.

Answer:

It is an index number in which different items of the series are accorded different weightage, depending upon their relative.

Question 4

Explain price relative.

Answer:

A price relative is the percentage ration of the value of a variable in the current year to its value in the base year.

Question 5

Define consumer price index number.

Answer:

It is an index number that measures the average change in the prices. The specific class of consumer pays this price for goods and services consumed in the current year in comparison with a base year.

Question 6

What is the wholesale price index?

Answer:

The wholesale price index calculates the relative difference in the prices of goods traded in the wholesale markets.

Question 7

State the two types of price index numbers.

Answer:

The two types of price index numbers are:

•       Consumer price index
•       Wholesale price index

Question 8

What should be the base year like?

Answer:

The base year should be a year without wide fluctuations, neither very long nor concise period of study and for which reliable data are available.

Question 9

Name the consumer groups for which the consumer price index number is computed.

Answer:

The consumer groups for which the consumer price index number is computed are:

•       Industrial workers
•       Urban non-manual employees
•       Agricultural labourers

Question 10

Name one principal limitation of index numbers.

Answer:

One principal limitation of index numbers is that they owe a difference in the unit of currency and the composition of production across the world. It is difficult to construct an index number that facilitates international comparison.

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