Introduction to index numbers - class-XII

$\Rightarrow$  Index for base period is always taken as : $100$.

An index number that can serve many purposes is called general purpose index.

Price Index indicates the changes in monetary value.

$\Rightarrow$  Price relatives are a percentage ratio of current year price and $Base, year, price$.

$\Rightarrow$  Index numbers are expressed in : $Percentage$.

We need an index number because it is helpful in measuring changes in value of money and it is also helpful for business community.

Index number can be used for Forecasting.
This index number is a useful number that helps us quantify changes in
our field. It is easier to see one value than a thousand different
values for each item in our field.

$\Rightarrow$  There are $Two$ types used for the calculation of index numbers.

$\Rightarrow$  An index number is called a simple index when it is computed from : $Single, variable$.

The Consumer Price Index (CPI) indicates the measure of the average change over time in the prices paid by consumers for a market basket of consumer goods and services.

Purchasing Power is just a short phrase for how much your money buys you.

In constructing index number geometric means relatives are Reversible.

CPI figures for most countries are usually calculated by using a Laspeyre's Index or Lowe Index.

Price Index Number is a normalized average (typically a weighted average) of price relatives for a given class of goods or services in a given region, during a given interval of time.
It is the most commonly used index number.

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

Price relative $=$ Base Price $/$ Current Price

$\Rightarrow$  When the price of divided by the price of the preceding year, we get : $Link,,relative.$

Consumer Price Index can be used to compare the cost of living at two different cities.

Fisher's Ideal Formula refers to the geometric mean of Laspeyres and Paasche formula. It is also known as Ideal formula also. It satisfies Factor Reversal Test as well as Time Reversal Test.

Indices calculated by chain base method are free from seasonal variations.

$\Rightarrow$  The chain base indices are not suitable for : $Long,range,comparisons.$

$\Rightarrow$  In chain base method, the base period is : $Not,fixed.$

$\Rightarrow$  For consumer price index, price quatations are collected from: $Retailers.$

$\Rightarrow$  When the prices of rice are to be compared, we compute: $Price,Index.$

$\Rightarrow$  Price relatives computed by chain base method are called $Link,,relatives.$

$\Rightarrow$  Another name of consumer's price index number is ; $Cost,of,living,index.$

$\Rightarrow$  Consumer price index are obtained by: $Family,,budget,,method,,formula.$

Clustering index is an example of non dense index.

Index which has an entry for some of key value is classified as non dense index.

In multilevel indexes, primary index is created for its first level  is classified as second level of multilevel index.

$\therefore$   By using simple average of price relative method,

$\Rightarrow$   Current price of soap is $Rs.11.$

A composite price index based on the prices of a group of items is known as the Aggregate price index.

Most index numbers are subjected to revision from time to time due to different reasons. In most cases it becomes compulsory to change the base year because numerous changes took place with the passage of time. For example change may happen due to disappearance of old items, inclusion of new ones, change in weights of commodities or changes in conditions, habits and standard of life etc.

$\Rightarrow$  In fixed base method, the base period should be : $Normal$.

If all the values are not of equal importance, the index number is called Weighted.

A weighted aggregate price index where the weight for each item is its base period quantity is known as the Laspeyres Index.

Index for base period is always taken as Hundred.

Cost of living index number $= \dfrac{\sum I _{i}W _{i}}{\sum W _{i}}$

$\sum I _{i}W _{i} = 1540$

$\sum W _{i} = 20$

$\Rightarrow$ Cost of living index number $= \dfrac{1540}{20} = 77$

An index number is called a simple index when it is computed from Single variable.

A quantity index that is designed to measure changes in physical volume or production levels of industrial goods over time is known as the Index of Industrial Production and Capacity Utilization.

CLI for the year $1996 = 140$

Cost of living index number $= \dfrac{\sum I _{i}W _{i}}{\sum W _{i}}$

$\sum I _{i}W _{i} = 2200 + 300y$

$\sum W _{i} = 14 + y$

$\Rightarrow$ Cost of living index number $= \dfrac{2200 + 300y}{14 + y} = 200$

$\Rightarrow 2200 + 300y = 2800 + 200y$

$\therefore y = 6$

$\Rightarrow$  Price index by using price relative method = $\dfrac{\sum\dfrac{ P _1}{ P _0}\times 100}{N}=\dfrac{796.66}{5}=159.33$

$\Rightarrow$  $P _{01}=\dfrac{\sum \dfrac{P _1}{P _0}\times 100}{N}=\dfrac{611.59}{5}=122.32$