Question

Define/ Explain the concepts:−

Index number

Answer 1

Index number is a statistical measure that is used to calculate the changes in variables, such as price and cost of living, with reference to different time periods. In the words of Spiegel “An index number is a statistical measure designed to show changes in a variable or group of related variables with reference to time, geographical location or other characteristics such as income, profession, etc.” The year for which the index number is prepared is called as current year. On the other hand, the year against which the changes in the current year are measured is known as base year.
Index numbers are constructed for different purposes. On the basis of the purpose, index numbers are classified in three categories as price index, quantity index and special purpose index