Question

Price index numbers express __________.

• A. relative price level of commodities depending on the base period
• B. the changes in the physical volume of production, construction or employment.
• C. level of the output in the economy.
• D. none of the above

Answer 1

The correct option is A relative price level of commodities depending on the base period

Index numbers are tools for measuring changes in the magnitude of a variable or a group of related variables overtime with respect to a chosen base year. They are the series of variables that show the relative position of a variable. When the concerned variable is price, it is known as a price index.

There are various methods of calculating a price index, and can be grouped as the following:

Simple Method	Weighted method
Simple Aggregate Method	Weighted Average of Price Relatives Method
Simple Average of Price Relatives Method	Weighted Aggregative Relatives Method Laspeyres’ Index Paasche’s Index Fischer’s Index