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
Define index number.
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.
What is a simple index number?
A simple index number is an index number in which all the items of the series are accorded an equal weightage or importance.
Define weighted index number.
It is an index number in which different items of the series are accorded different weightage, depending upon their relative.
Explain price relative.
A price relative is the percentage ration of the value of a variable in the current year to its value in the base year.
Define consumer price index number.
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.
What is the wholesale price index?
The wholesale price index calculates the relative difference in the prices of goods traded in the wholesale markets.
State the two types of price index numbers.
The two types of price index numbers are:
- Consumer price index
- Wholesale price index
What should be the base year like?
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.
Name the consumer groups for which the consumer price index number is computed.
The consumer groups for which the consumer price index number is computed are:
- Industrial workers
- Urban non-manual employees
- Agricultural labourers
Name one principal limitation of index numbers.
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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