Question

When the price of a year is. divided by the price of a particular year we get:

• A. Simple relative
• B. Link relative
• C. (a) and (b) both
• D. None of them

Answer 1

Answer: (A)

Simple relative

$\Rightarrow$ When the price of year is divided by the price of particular year we get : $Simplerelative.$

$\Rightarrow$ Under this method, the price Index for a given year is calculated as the simple average of the price relatives of the different items included in the index numbers.

$\Rightarrow$ The simple average used, here, may be of any type viz. arithmetic mean, geometric mean, harmonic mean, median or mode, but arithmetic mean is usually preferred to, for its simplicity in calculation and geometric mean for its ability of measuring the relative changes which is the inherent feature of an index number.