1.

From the following observations compute Carl Pearson's coefficient of correlation between
age and success in an examination. Also calculate bits probable error.

Age 15 16 17 18 19 20 21 22

Number of 200 300 100 50 150 400 250 150

Candidates
appeared

Number of 120 180 60 30 90 250 140 80

successful
candidates

Ans

W.N

Percentage of success in different age groups

● For age 15 ~ 120÷200×100 = 60%
● For age 16 ~ 180÷300×100=60%
● For age 17 ~ 60÷100×100=60%
● For age 18 ~30÷50×100=60%
● For age 19 ~ 90÷150×100=60%
● For age 20 ~ 250÷400×100=62.5%
● For age 21 ~ 140÷250×100=56%
● For age 22 ~ 80÷150×100=53.3%

X Y X-xbar

15 60 -4

16 60 -3

17 60 -2

18 60 -1

19 60 0

20 63 1

21 58 2

22 53 3

148 472

1
Mean of Y = 472÷8 = 59

Y-Ybar (mean) XY X×x Y×y

1 -4 16 1

1 -3 9 1

1 -2 4 1

1 -1 1 1

1 0 0 1

4 4 1 16

-3 -6 4 9

-6 -18 9 36

-30 44 66

R=. Σxy÷√Σx²×(Σy²)
=-30 ÷√44×(66)
=-30÷53.88
=0.5567.

Lag and lead in correlation

1. Following are the monthly figures of advertising expenditure

and sale of a time . It is found that advertisement expenditure has
its impact on sales generally after two months . Allowing for this
time lag calculate the coefficient of correlation between
advertising expenditure and sales.

2
 Month Jan Feb Mar Apr May June July Aug

Advertisement 2 3 4 5 6 7 8 9
expenditure
(in lakhs )

Sales (in 60 70 80 90 100 90 120 150

lakhs)

Ans.

Change in scale must be used here

X Y XY X² Y²

2 8 16 4 64

3 9 27 9 81

4 10 40 16 100

5 9 45 25 81

6 12 72 37 144

7 15 105 49 225

27 63 305 140 695

N =6

r = N Σxy -( Σx)(ΣY) ÷√[NΣx² - ( Σx)²]×[NΣY² - (ΣY)² ]

r = 6×305-(27)(63) ÷ √[6×140 -(27)² ]×[6×695-(63)² ]

=129 ÷√[111] ×[201]
= 129÷ 149
= 0.865.

3
2. Calculate correlation between x and y series.

X Y

Number of items 15 15

Arithmetic mean 25 18

Squares of deviation from mean 136 138

We are given
N=15 ,x̅ =25 , ȳ =18,Σx² = 136 , ΣY² =138 ,ΣXY =122

R = Σxy ÷ √Σx² × ΣY²

122 ÷√136 ×138 = 122÷137

= 0.89.

Note

{r = co - variance of X and Y ÷ standard deviation of X × standard deviation of Y

SD = √of variants }

3. co- variants between x any y variables is 9.6 and the variance of X and y respectively i16
and 9 . Find the coefficient of variation.

Ans.
r = co- variants of X and y ÷ standard deviation of X × standard deviation of y
standard deviation of X = √16= 4
standard deviation of y = √9 = 3

R = 9.6 ÷ 4×3 = 0.8.

4
1. Following were the results obtained from analysis of 12 pair of observations .

Total X = 30
Total y = 5
Σx². = 670
ΣY². = 285
Total XY = 334
It was discovered that one pair of values X=11 y=4 were copied wrong .The correct
values of the pair were X = 10 , Y = 14 . Find the correct value of correlation.
Ans. Correct Σx= 30 -11+(10) = 29.
Correct ΣY = 5 - 4+(14) = 15.
Correct Σx² = 670 - 121 +(100) = 649
Correct ΣY² = 285 - 16 + (196) = 465.
Correct Σxy = 334 - (11×4) + (14 ×10) = 430 .

r = N Σxy -( Σx)(ΣY) ÷√[NΣx² - ( Σx)²]×[NΣY² - (ΣY)² ]

= 12×430 - (29) (15) | √[ 12×649 - (29)^2] × [ 12×465 -(15)^2]
= 5,160 - 435 | √ [ 7,788 - 841] × [ 5,580 - 225]
=. 4,725 | √ [ 6,947 × 5,355]
= ,4725 | √37,201,185
= 4,725 | 6,100
= 0.774.

2. N = 30
Σx = 120
ΣY = 90
Σx². = 600
ΣY² = 250
Σxy = 356

Wrong values :
X = 8 , Y = 10
X = 12 , Y= 7
Correct values :
X= 8 , Y = 12
X= 10 , Y = 8.

Ans :.

5
Σx = 120 - (8 + 12) +(8+10)
= 118.
ΣY = 90 -(10+7) + (12+8)
= 93.
Σx² = 600 - (64+144) + ( 64 +100)
= 556.
ΣY² = 250 - (100 + 49) + (144 +64)
= 309.
Σxy = 356 -[ (8×10) +(12×7) ] +[ (8×12) +(10×8)]
= 368.
r = NΣxy - (Σx) (ΣY) ÷ √ [(NΣx² - (Σx²) × (NΣY² - (ΣY²)]
r= 30×368 - (118×93) ÷ √[(30×556 -(118)² × (30×309 - (93)² ]
r = 11,040-10,974÷√[(16,680 - 13924) × (9270 - 8,649)]
r =. 66 ÷ √[2,756×621]
r = 66÷ 1308.23
r = 0.65.

Spearman's Rank correlation

Note

R= 1- {6ΣD² ÷N(N² -1)}

Where
R= Rank coefficient of correlation
D = Difference between two ranks
D = (R1 -R2)
N = Number of pairs of observations

1. Two ladies were asked to rank 19 different types of nail polishes.The results
we're

Nail polishes Neelima Poornima D D²

A 1 6 -5 -25

B 6 8 -2 -4

C 3 3 0 0

D 9 7 2 4

6
 E 5 2 3 9

F 2 1 1 1

G 7 5 2 4

H 10 9 1 1

I 8 4 4 16

J 4 10 -6 -36

Total 100

R= 1- {6ΣD² ÷N(N² -1)}

= 1- {6×100 ÷10(100-1)}
= 1- {600 ÷ 990}
= 1- 0.606
= 0.394.

2. Calculate Spearman's Rank correlation coefficient from the following .

X 85 45 55 58 55 60 45 68 70 45 91

Y 86 56 50 43 56 62 64 65 70 64 94

Ans.

R1 R2 D D²

2 2 0 0

11 8.5 2.5 6.25

7.5 5 -2.5 6.25

6 11 -5 25

7.5 8.5 -1 1

5 7 -2 4

11 5.5 5.5 30.25

4 4 0 0

3 3 0 0

7
 11 5.5 5.5 30.25

1 1 0 0

103

R = 1- {6[ΣD²+1|12(m1^3 - m1) + 1÷12(m2^3 - m2)+1|12]. ÷N^3 -N}

When there is equal tie in Ranks

Concurrent Deviation

Equation :
rc = +-√+-{(2c-N)|N}

1. Estimate correlation through concurrent Deviation

X Y Sign Sign Sign

X Y X×Y

85 18 None None None

91 20 + + +

56 16 - - +

72 15 + - -

95 19 + + +

76 18 - - +

89 17 + - -

51 14 - - +

59 18 + + +

8
 90 15 + - -

N=6

C=8
rc = +-√+-{(2c-N)|N}
= +-√+-{(2×8-6)|6}
= +-√+- {10|6}
= .1.29.

2.

X Y Sign Sign Y Sign XY

X

65 60 None None

40 55 - - +

35 50 - - +

75 56 + + +

63 30 - - +

80 70 + + +

35 40 - - +

20 35 - - +

80 80 + + +

60 75 - - +

50 80 - + -

N=9

.c=10
rc = +-√+-{(2c-N)|N}
= +-√+-{(2×9-10)|10}
= 0.8.

9
 Regression
{

Regression estimates the nature and extent to its relationship . Can be used to find unknown values from
the known values, which is not possible in correlation.
}

Regression equation X on Y

X - X̅ = bxy ( Y - Ȳ )

where ,bxy = Regression coefficient of x on y

bxy can be determined using any of the following

1. bxy = r{ standard deviation of X | standard deviation of Y }

2. bxy = { NΣxy - (Σx) (ΣY) } | NΣY² - (ΣY)²
(Based on actual data or square of value method)
3. bxy = {NΣdxdy - (Σdx)(ΣdY)|NΣdY² - (ΣdY)²}
(Here deviation are taken from assumed mean)

Regression of y on x

Y - Ȳ = byx(X - X̅)
where ,byx = Regression coefficient of Y on X

bxy can be determined using any of the following

1. byx = r{ standard deviation of Y | standard deviation of X }

2. byx = { NΣxy - (Σx) (ΣY) } | NΣx² - (Σx)²}
3. byx = {NΣdxdy - (Σdx)(ΣdY)|NΣdx² - (Σdx)²}
(Here deviations are taken from assumed mean)
4. byx = Σxy| Σx²

10
 Standard Error of estimates

Standard Error of Estimate of X on y

Equation :
SXY = √{Σ(x - xc)² |N }€
Or
SXY = standard deviation of X × √ 1-r²
Where
● X _ actual values
● xc _ estimate values

Standard Error of Estimate of Y on X

Equation :

SYX= √{Σ(y - yc)² |N }

Or
SYX = standard deviation of Y × √ 1-r²
Where
● Y_ actual values
● Yc _ estimate values

1. Calculate regression of X on y and Y on X from the following .

X 1 2 3 4 5 15

Y 2 5 3 8 7 25

1. Estimate the value of X , when value of y= 10

2. Estimate the value of Y , when value of x= 10
3. Also calculate correlation coefficient.

Ans.

11
 Xy x² Y²

2 1 4

10 4 25

9 9 9

32 16 64

35 25 49

88 55 151

X̅ = 15|5 = 3
Ȳ = 25|5 = 5

Regression equation X on Y

X - X̅ = bxy ( Y - Ȳ )

Bxy = { NΣxy - (Σx) (ΣY) } | NΣY² - (ΣY)²

= { 5×88 - ( 15) (25) } | 5× 151 - (25)²}

=. { 440 - 375 } | 755- 625

= 65 | 130.
= 0.5
.
X - X̅ = bxy ( Y - Ȳ )
X - 3= 0.5(Y- 5)
X-3 = 0.5y - 2.5
0.5y - 2.5 + 3 = X
0.5y +0.5 = X

Regression of y on x

Y - Ȳ = byx(X - X̅)

byx = { NΣxy - (Σx) (ΣY) } | NΣx² - (Σx)²}

byx = { 5×88 - ( 15) (25) } | 5× 55 - (15)²

12
 byx. = { 440 - 375 } | 275 - 225
byx = 65 | 50
byx = 1.3.

Y - Ȳ = byx(X - X̅)
Y - 5 = 1.3( x- 3)
Y-5 = 1.3x - 3.9
1.3x - 3.9 + 5 = Y
1.3x - 1.1 = Y

1. X = 0.5y +0.5
X= 0.5 × 10 + 0.5
X = 5.5
2. 1.3x - 1.1 = Y
1.3 × 7 - 1.1 = Y
9.1- 1.1 = Y
8=Y

3. r. = √ bxy × byx
= √0.5 × 1.3
= √.65
= 0.80.
2. Estimate the regression equation from the following data using deviations taken from assumed
mean .

Age 56 42 36 47 49 42 60 72 63 54

BP 147 125 118 128 145 140 155 160 149 150
● Determine the regression equation X on Y and Y on X .
● Determine B.P of a person who's age is 45.
● Determine the age when B.P is 170
● Determine the coefficient of correlation between X and Y.

Ans.

.
Regression equation X on Y

X - X̅ = bxy ( Y - Ȳ )

bxy = {NΣdxdy - (Σdx)(ΣdY)|NΣdY² - (ΣdY)²}

= {10× 1220 - (2×-3) | 10 × 1705 - ( -3)^2}
= 12,200 - -6 | 17,050 - 9

13
 = 12,206 | 17,041
= 0.716.

X - X̅ = bxy ( Y - Ȳ )
X - 52 = 0.716( Y - 142)
X - 52 = 0.716 Y - 101.67
0.716Y - 49 = X
X = 0.716Y - 49

Regression of y on x

Y - Ȳ = byx(X - X̅)

byx = {NΣdxdy - (Σdx)(ΣdY)|NΣdx² - (Σdx)²}

= 12,206 | 11,000 - 4
= 1.11

Y - Ȳ = byx(X - X̅)
Y - 142 = 1.11 ( X - 52)
Y - 142 = 1.11X - 57.72
1.11X - 57.72 + 142
1.11X + 84 = Y
Y = 1.1X + 84.

1. X = 0.716Y - 49
X = 0.716 × 170 - 49
X = 121.72 -49
X = 73

2. Y = Y = 1.1X + 84
Y = 1.11 × 45 + 84
Y = 50 + 84
Y = 134.

3. r. = √ bxy × byx
= √ 0.716 × 1.11
= 0.891.

W.N

X̅ = 52.2
= 52.

14
 Ȳ = 142

dx = dY = dX^2 dY^2 dxdy

X-A Y-A

4 5 16 25 20

-10 -17 100 289 170

-16 -24 256 576 384

-5 -14 25 196 70

-3 3 9 9 -9

-10 -2 100 4 20

8 13 64 169 104

20 18 400 324 360

11 7 121 49 77

3 8 9 64 24p0

2 -3 1,100 1,705 1220

3. For the following data setup regression equation and estimate sales for the advertisement
expenditure of 7,500,000.

Sales ( ₹in 14 16 18 20 24 30 32
crores.)

Advertisement 52 62 65 70 76 80 78
( ₹ in lakhs)

Ans.
Regression equation X on Y
X̅ = 22
Ȳ. = 69

X - X̅ = bxy ( Y - Ȳ )
Bxy = { NΣxy - (Σx) (ΣY) } | NΣY² - (ΣY)²
= 7× 11,010 - (154 × 483) | 7 × 33,933 - (483)^2
=. 77,070 - ( 74,382) | 237,531 - 233,289
= 2,688 | 4,242

15
 = 0.63.
X - X̅ = bxy ( Y - Ȳ )
X - 22 = 0.63 ( Y - 69)
X - 22 = 0.63Y - 43.47
0.63Y - 43.47 + 22 = X
X = 0.63Y - 21

When Y = ₹ 7,500,000
X = 0.63Y - 21
= 47.25 - 21
= 26
Sales = ₹ 26 crores.

W.N

XY X^2 Y^2

728 196 2,704

992 256 3,844

1,170 324 4,225

1,400 400 4,900

1,824 576 5,776

2,400 900 6,400

2,496 1,024 6,084

11,010 3,676 33,933

4. The height of father and son are given below

● Estimate son's height when father's height is 64 inches
● Estimate son's height when father's height is 64 inches
● Find coefficient cor

Fath 65 66 68 69 71 73 67 68 70 72 79
er

16
 Son 67 68 64 72 70 69 70 68 68 73 65
Σx = 758
ΣY= 754
X̅ = 69
Ȳ. = 69

dx dy dx^2 dy^2 dxdy

-4 -2 16 4 8

-3 -1 9 1 3

-1 -5 1 25 5

0 3 0 9 0

2 1 4 1 2

4 0 16 0 0

-2 1 4 1 -2

-1 -1 1 1 1

1 -1 1 1 -1

3 4 9 16 12

0 -4 0 16 0

-1 -5 61 75 28

Regression equation X on Y

X - X̅ = bxy ( Y - Ȳ )

bxy = {NΣdxdy - (Σdx)(ΣdY)|NΣdY² - (ΣdY)²}

= 11× 28 -( -1×-5) | 11 × 75 - (-5)^2
. = 303 | 800
= 0.378.

X - 69 = 0.378 ( Y - 69)
X - 69 = 0.378Y - 26
0.378Y - 26 + 69 = X

17
 0.378 Y + 43 = X .

Father's age
0.378 × 71 + 43 = X
69.8 = X

Regression of y on x

Y - Ȳ = byx(X - X̅)

byx = {NΣdxdy - (Σdx)(ΣdY)|NΣdx² - (Σdx)²}

= 303 | 11 × 61 - 1
= 303 | 670
= 0.45

Y - Ȳ = byx(X - X̅)

Y - 69 = 0.45 ( X - 69)
0.45 X - 31.05 + 69 = Y
Y = 0.45 X + 37.95

Son's age
= 0.45 × 64 + 37.95
= 66.75.

r = √ bxy × byx
= √ 0.378 × 0.45
= 0.41

5. Following are the monthly figures of advertisement expenditure and sales of a firm .It is found
that the advertisement expenditure has the impact on sales after 2 months . Calculate coefficient
of correlation and estimate possible sales when the company spends 250 on advertisement.

Month jan Feb Marc Apr May June July Aug Sept oct
h

Adv 50 60 70 90 120 150 140 160 170 190

18
 Sales 1200 1500 1600 2000 2200 2500 2400 2600 2800 2900

Ans
X ÷ 10 Y ÷ 100 XY X^2 Y^2

5 16 80 25 256

6 20 120 36 400

7 22 154 49 484

9 25 225 81 625

12 24 288 144 576

15 26 390 225 676

14 28 392 196 784

16 29 464 256 841

84 190 2,113 1,012 4,642

N= 8
X̅ = 10.5
Ȳ = 23.75

r = N Σxy -( Σx)(ΣY) ÷√[NΣx² - ( Σx)²]×[NΣY² - (ΣY)² ]

= 944 | √ (8,096 - 7,056) × ( 37,136 - 36,100)
= 944 | √ 1,040 × 1,036
= 944 | √ 1,077,440
= 944 | 1038
= 0.909.

byx = { NΣxy - (Σx) (ΣY) } | NΣx² - (Σx)²}

= { 8 × 2,113 - ( 84 × 190) | 8 × 1,012 - ( 84)^2
= 16,904 - 15,960 | 8,096 - 7,056
=. 944 | 1,040
= 0.907

Y - Ȳ = byx(X - X̅)
Y - 24 = 0.907 ( X - 11)
0.907X - 9.977 + 24 = Y
0.907X + 14.02 = Y

When x = 25

19
 0.907× 25 +14.02 = Y
22.675 + 14.02 = y
Y = 37.
3700.

6. Find out arithmetic mean , regression and correlation coefficient.

2Y - X - 50 = 0
3Y - 2X -10 = 0

Ans.

2Y -X = 50
3Y - 2X = 10

3(2Y -X) = 50×3

2(3Y - 2X) = 10× 2

6Y - 3x = 150
(Less)
6Y - 4x = 20
X = 130(mean)

Therefore . 2Y - 130 = 50
Y = 90
3Y - 2(130) = 10
Y = 90

Regression Y on X

2Y - x = 50
Y = 50 + X | 2
Y = 50 | 2 + X | 2
Y = 25 + x ( 1| 2)
byx = 0.5
0r
2Y - x = 50
2Y = X + 50
Y. = ( X + 50) |2
Y. =. 0.5X + 25
byx = 0.5

Regression X on Y
2Y - X = 50
X = 2Y - 50

20
 3Y - 2X -10 = 0
3Y = 2X + 10
3Y - 10 = 2X
(3Y +10) | 2 = X
X = 1.5Y - 5
bxy = 1.5

r = √bxy × byx
= √ 1.5 × 0.5
=0.86

Weighted Index numbers

Weighted aggregative method

Laspeyres method

P01 ={ ΣP1 × Q0 |ΣP0 ×Q0 } × 100

Paaches method

P01 ={ ΣP1 × Q1 |ΣP0 × Q1 } × 100

Fishers method

P01 = √{ (ΣP1 × Q0 |ΣP0 ×Q0 ) × (ΣP1 × Q1 |ΣP0 × Q1) } × 100

Index numbers are considered as an economic barometer.

Types of Index numbers.

● Quantity index numbers
● Value Index numbers
● Cost of living index numbers
● Consumer price index numbers

21
1.
Commodities 2017 2018

A 20 25

B 30 30

C 10 15

D 25 35

E 40 45

F 50 35

Ans.

I= Log of I

P1 | P0
× 100

125 2.0969

100 2.0000

150 2.1761

140 2.1461

112.5 2.0511

70 1.8451

697.5 12.3153

P01 = ΣI | N
= 697.5 | 6
= 116.25.

12.3153 | 6
Antilog × 12.3153 | 6

22
 Antilog × 2.05255
112.9

2.
Commodities 2017 price Quantity 2018 price Quantity

A 20 8 40 6

B 50 10 60 5

C 40 15 50 15

D 20 20 20 25

Ans.

P1Q0 P0Q0 P1Q1 P0Q1

320 160 240 120

600 500 300 250

750 600 750 600

400 400 500 500

2,070 1,660 1790 1,470

Laspeyres method
P01 ={ ΣP1Q0 | ΣP0Q0 } × 100
= { 2,079 | 1,660} × 100
=. 124.69
Paaches method
P01 = { ΣP1 × Q1 |ΣP0 × Q1 } × 100
= { 1,790 | 1470 } × 100
= 121.76
Fishers method
P01 = √{ (ΣP1 × Q0 |ΣP0 ×Q0 ) × (ΣP1 × Q1 |ΣP0 × Q1) }100
= √ { 1.2469 × 1.2176 } ×100

23
 = 123.21

Quantity index numbers

Laspeyres method

Q01 ={ ΣQ1 × P0 | ΣQ0 ×P0 } × 100

Paaches method

Q01 ={ ΣQ1 × P1 | ΣQ0 × P1 } × 100

Fishers method

Q01 = √{ (ΣQ1 × P0 | ΣQ0 ×P0 ) × (ΣQ1 × P1 |ΣQ0 × P1) } × 100

1. Calculate price and quantity intexe's from the following.

Commodities Price Quantity

P0 P1 Q0 Q1

A 4 7 10 8

B 5 9 8 6

C 6 8 15 12

D 2 2 5 6

Ans.

P1Q0 P0Q0 P1Q1 P0Q1

70 40 56 32

72 40 54 30

120 90 96 72

24
 10 10 12 12

272 180 218 146

Laspeyres method
P01 ={ ΣP1Q0 | ΣP0Q0 } × 100
= { 272 | 180 } 100
= 151.11.
Q01 ={ ΣQ1 × P0 | ΣQ0 ×P0 } × 100
= { 146 | 180 } 100
= 81.11.

Paaches method
P01 = { ΣP1 × Q1 |ΣP0 × Q1 } × 100
= { 218 | 146} 100
= 149.31.
Q01 ={ ΣQ1 × P1 | ΣQ0 × P1 } × 100
= { 218 | 272} 100
= 80.14.
Fishers method
P01 = √{ (ΣP1 × Q0 |ΣP0 ×Q0 ) × (ΣP1 × Q1 |ΣP0 × Q1) }100
= √ { 1.51 × 1.49 } 100
= 225.
Q01 = √{ (ΣQ1 × P0 | ΣQ0 ×P0 ) × (ΣQ1 × P1 |ΣQ0 × P1) } × 100
= √ { .081 × 0.80} 100
= 64.8.

2.

Test of Index numbers

● Time reversal Test

P01 × P10 = 1
● Factor reversal Test

25
 P01 × Q01 = N01 = ΣP1 × Q1 | ΣP0Q0
.

Value Index numbers

{ ΣP1Q1 | ΣP0Q0 } × 100

= { 218 | 180 }100
= 121.1.
P01 × Q01 = √{ [(ΣP1Q0 |ΣP0Q0 ) ×(ΣQ1P1 |ΣQ0P1) ] × [ (ΣQ1P0 ΣQ0P0 ) ×
(ΣQ1P1|ΣQ0P1) } ×100
= √{2.25 × 0.648 } × 100
= 1.23.
P10 = √ {( ΣP0Q1 | ΣP1Q1)
= √ (146 | 218)
=
Time reversal Test

P01 × P10 = 1
1.21 × 0.81= 0.99

Quantity = Expenditure | price

Quantity = Total value | Price

1. From the following data compute Fishers ideal Index and show wheather it
satisfies both Time and Factor reversal tests.

Commodities Base Year Current Year

Price per unit Total value Price per unit Total value

26
 A 2 40 5 75

B 4 16 8 40

C 1 10 2 24

D 5 25 10 60

Ans.

Q0 Q1 P1Q0 P1Q1 P0Q0 P0Q1

( Total value | ( Total value |
price) price)

20 15 100 75 40 30

4 5 32 40 16 20

10 12 40 24 10 12

5 6 50 60 25 30

202 199 91 92

P01 = √{ (ΣP1Q0 |ΣP0Q0 ) × (ΣP1Q1 |ΣP0Q1) }100

= √ { ( 202 | 91 ) ( 199 | 92) } 100
= 21.8

Time reversal Test

P01 ×P10 = 1

P10 = √ ΣP0Q1 | ΣP1Q1

= √ 92 | 199
= 0.67

Q01 = √{ (ΣQ1P0 | ΣQ0P0 ) × (ΣQ1P1 |ΣQ0P1) } × 100

27
 = √ { ( 92 | 91 ) (199 | 202) } 100
= √ { 1.01 | 0.98 } 100
= √ 103.06
= 10.15.

Weighted average of Price Relatives Methods

.P01 = ΣIV | Σv
Or
ΣIW | Σw
Where :
I = price relatives ( [ P1|P0 ] × 100)
V = W → Given fixed weight or P0Q0

When Geometric mean is applied,

the equation is :
P01 = Antilog {Σ(logI).V | ΣV }

1. Calculate Price index number using Weighted average of Price Relatives Method from the
following data.

Commodities Price Weight

2009 2018

Rice 20 50 5

Wheat 10 30 3

Sugar 20 40 2

Ans.

I= IW
(P1 | P0 ) 100

250 1250

300 900

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 200 400

750 2550

P01 = ΣIW | Σw
= 2550 | 10
= 255.

Cost of living index number

1. Aggregative Expenditure Method
P01 = ( ΣP1Q0 | ΣP0Q0 ) 100

2. Budget expenditure method

P01 = ( ΣIV | V ) 100

1. Calculate cost of living index number using

● Weighted arithmetic mean
● Weighted Geometric mean

Ans.

2.

1. Calculate the change in cost of Living for 2018 as compared to 2010

Items Food Rent Clothing Fuel Miscellaneous

Expenses 35 20 20 10 15
( in %)

Price 2000 800 1000 400 1000

(2010)

Price 4,000 1000 1200 600 2000

(2018)

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 It is decided by the management of a firm to introduce the system of payment of Dearness
Allowance to its workers from the beginning of the year 2019 . What is the that the worker is
entitled , to get from 2019 who had been drawing a salary of ₹ 20,000 per month for the last eight
years?

Ans.

I IW
[P1|P0 ] × 100

200 7000

125 2500

120 2400

150 1500

200 3000

16,400

ΣIW | Σw
= 16400 | 100
= 164.

Amount.,0f Dearness Allowance to be given =

Change in cost of living | 100 × salary

= 64 |100 × 2000

Fixed base index numbers

Fixed base intex number is an intex number where base tera never change

FBI =

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 1. Calculate the price relative based on 2010 for all the years from the following data .

Year 2010 2011 2012 2013 2014 2015 2016 2017 2018

Price 50 70 800 100 120 150 200 220 250

Ans.

FBI = (price of the current year | price of the basd year. ) 100
=

Chain based Index number

The following are the steps involved in the construction of Chain Base Index Numbers: 1.
Firstly, link relatives are computed using the following formula:

Link Relatives = Current Year Price | Previous Year Price x 100

2. Chain together these percentages by successive multiplication, using the following

formula (ie, convert the link relatives into chain base index)

Chain Base Index = Link Relative of Current Year × Chain Base Index of Previous Year |
100

If there is only one series of observations (ie, if we are given prices of only one
commodity for different years), then the fixed Base index and Chain Base Index numbers
will always be the same.

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