Tag: introduction to index numbers

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Multiple choice business mathematics and statistics introduction to index number introduction to index numbers index numbers applied statistics

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

  1. zero level of multilevel index.

  2. third level of multilevel index.

  3. second level of multilevel index.

  4. first level of multilevel index.
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

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

Multiple choice business mathematics and statistics introduction to index number introduction to index numbers index numbers applied statistics

Construct the index number for 1991 taking 1990 as the base year from the following data by simple average of price relative method.

Commodity A B C D E
Price in 1990 100 80 160 220 40
Price in1991 140 120 180 240 40

  1. 122.32

  2. 130.14

  3. 114.56

  4. 124.53
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation
 $Commodity$ $Price\,in\,1991$$P _0$  $Price\,in\,1991$$P _1$  $Price\,relative$$\dfrac{P _1}{P _0}\times 100$ 
 $A$ $100$  $140$  $140$ 
$B$  $80$  $120$  $150$
$C$  $160$  $180$  $112.5$
$D$  $220$  $240$  $109.09$
$E$  $40$  $40$  $100$ 
 $Total$     $611.59$

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

$\Rightarrow$   $P _{01}=\dfrac{\sum P _{01}}{N}=\dfrac{611.59}{5}=122.32$

Multiple choice business mathematics and statistics introduction to index number introduction to index numbers index numbers applied statistics

The current price of a soap is Rs 11.  The base price is 3, find price relative.

  1. $2.7$
  2. $2.5$
  3. $3.6$

  4. None of the above
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

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

$\Rightarrow$   Base price of soap is $Rs.3$
$\Rightarrow$   $Price\, relative$ = $\dfrac{Current\,price}{Base\,price}=\dfrac{11}{3}=3.6$

Multiple choice business mathematics and statistics introduction to index number introduction to index numbers index numbers applied statistics

Which of the following statement is incorrect?

  1. index number is a relative measurement

  2. in fact all index numbers are weighted

  3. theoretically the best average in construction of index numbers is Geometric mean

  4. it is not possible to shift the base if it is the case of fixed base index
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

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.

Multiple choice business mathematics and statistics introduction to index number introduction to index numbers index numbers applied statistics

In fixed base method, the base period should be: 

  1. For away

  2. Abnormal

  3. Unreliable

  4. Normal
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

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

$\Rightarrow$ The year which is selected as a base should be a normal year, or in other words, the price level in this year should neither be abnormally low nor abnormally high. If an abnormal year is chosen as the base, the price relatives of the current year calculated on its basis would give misleading conclusions. 
$\Rightarrow$  For example, a year in which war was at its peak, say the year 1965, is chosen as a base year; thus the comparison of the price level of the subsequent years to the price of 1965 is bound to give misleading conclusions as the price level in 1965 was abnormally high.
$\Rightarrow$  In order to remove the difficulty associated with the selection of a normal year, the average price of a few years is sometimes taken as the base price. The fixed base method is used by the government in the calculation of national index numbers.

Multiple choice business mathematics and statistics introduction to index number introduction to index numbers index numbers applied statistics

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

  1. Paasche Index

  2. Consumer Price Index

  3. Producer Price Index

  4. Laspeyres Index
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

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