Tag: weighted methods to calculate index numbers

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Multiple choice business mathematics and statistics applied statistics weighted methods to calculate index numbers construction of index numbers index numbers

If all the values are of equal importance, the index numbers are called: 

  1. Weighted

  2. Unweighted

  3. Composite

  4. Value index
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

$\Rightarrow$  If all the values are of equal importance, the index numbers are called: $Unweighted$.

$\Rightarrow$  There are two methods of constructing unweighted index numbers: $(1)$ Simple Aggregative Method $(2)$ Simple Average of Relative method.
$\Rightarrow$  Simple Aggregative Method - In this method, the total price of commodities in a given (current) year is divided by the total price of commodities in a base year and expressed as percentage.
$\Rightarrow$  Simple Average of Relative method - In this method, we compute price relatives or link relatives of the given commodities and then use one of the averages such as the arithmetic mean, geometric mean, median, etc.

Multiple choice business mathematics and statistics applied statistics weighted methods to calculate index numbers construction of index numbers index numbers

Using $2005$ as base year , the price of a commodity in $2006$ are 118. Calculate the index number for 2005 if 2006 is taken as the base year.

  1. 84.75

  2. 82.18

  3. 81.18

  4. 78.07
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

$N=1$ (Since only one commodity)

Take price $=Rs.100$  as base price for $2005$
$\implies p _1=100$
$p _0=118$ (given)
$\implies $ index no. $=\cfrac{1}{N}(\sum\cfrac{p _1}{p _0}\times 100)$
$\implies\cfrac{1}{1}(\sum\cfrac{100}{118}\times 100)=84.775\approx 84.75$