INDEX NUMBER ‘Meaning ‘ ‘An Index Numbey js a statistical device for comparing the general level of magnitude ofa yup of distinct but/ ‘elated variables in two or more situations. If we want to compare the price level in India in ear 2008 with what it was in year 1990, we shall have to consider a group of variables, such as the prices of wheat, rice, cloth, oil, vegetables, milk, house rent ete. {fall these variables change in exactly the same ratio and in the same direction, there will be no difficulty in finding out the change in the price-level as a whole. But in reality the prices of different commodities change by different ratios and in different directions. There is another problem also. The prices of different commodities are expressed in different measurement units. For example, the prices of wheat, rice, pulses, ete. are expressed in terms of kilograms or quintals, the price of milk, oil, etc., in terms of litres and house rent in terms of rooms. The units of measurement being different and price changes taking place by different poportions, and in different directions, the difficulty arise when the relative changes have to be averaged. ‘What we want is one figure as an indicator or index of the change in the magnitude of the prices of different commodities as a whole, so that one can know the extent and direction of change, In other words, index numbers are intended to show variations in magnitude which are not susceptible to direct measurement or observation, Thus, an index number performs a fonction similar to that of an average. In fact, “Index numbers are a specialised type of average” and this technique is used to measure the changes in some quantity which we cannot observe directly. Hence, index numbers are among the most useful tools in the statistician’s kit. Definitions 5 ‘The term ‘Index Number’ refers to a summary measure which states a relative comparison between groups of related items : 1 Index numbers have been defined by Croxton and Cowden as, “Index Numbers are devioes for measuring differences in the magnitude of a group of related variables.” Index numbers measure absolute and relative changes in the prices over time and space. 2. Horace Secrist writes, “Index Numbers are a series of numbers by which changes in the magnitude of a phenomenon are measured from time to time or from place to place.” __ 8, According to Dn A. L. Bowley, “A series of index numbers is a series which reflects in its trend and fluctuations the miovernaes Of eaine auanity to which it is related.” 4.In the words of M. Spiegel, “An index number is a statistical measure designed to sHiow oases in variable or a group of related variables with respect to time, geographic location or 6. Aea hag Al, Willett and Simone, “An Index Number i . Accor fess a er is a speci thas pnteording te Messe ative changes from time to time or from lace co see 8 In the we utc. 7, Clark and L. L. Schkade, “An index number is a percentage Teative that compares economic measures in a given period with those same nicootires ate fixed time period in the past.” «203 isnsiaglorati(usualy in al variables between two dist why Sorex nt sumbers provide a means of dex 18 simple numbers which data, that i, of reduc thats of reducing complex forms relative changes in the variablo through is of John 1. Griffin, “An Inde period, shows by its variations the ch ‘numbers are used to measuro lex number techniques () Index numbers are specialised averages : An average is tho construction cost between two points ‘a group offi are worth only what earnings or like ‘money Keeps rth only 10 ie real fent, the businessmen 1 to measure the changes in any. 12 of import-export, situation of ‘changes ia the rate of national ast years indices of import of the jon are taken by analyzing these power of money. These t¥o tion of economists for many , and compare changes of values : Index Numbers are very helpful in deflating ie ymena, like industrial or busines (6) Helpful in i ious a eee te acumbers. The major purpoves and ee acai | temas aco on the basis of fae prs. The change une of people can be a ‘measure and compare change woes of index numbers are : basis co the basis of current price, real changes in pet capital ‘measure relative temporal o ae epealy measured in this mot be ascertained, but Deflating it un fixed price the porPace «ampared with some bse gure ta ne 85 national income cap or» be calelated by Deflating the monetary wages with ‘the 32, among different plage sea felp of consumer price index. Teonomie Barometers: As the ar pressure is measured By tay Eades numbers act 9t Fr pumbers measure the economic and commercial Tends nthe sme manta nd NS eign Echmnge Reserve dept 8 measure the pulse of country’s economy phenomens like price lel ext af‘SBPD Publications Index Number 204 ‘armada Bomanie Barometers of the country. Simpson and k so hay are turned a5 Exon Mone ofthe most widely used statistical devic™ stated Inder numer af tne economy and they have eame to be used ag most popular statistical device, index numbe ational ead a ne ee an a ont Bein lex number measure thy ean not be known an gets snecleeset see se id Ea ea hm wd Doe pn eres she get fe» perpne beaamesinprper a th aise Se ype oes tages b= Fo For speci purpooe te he Sndex number shold be uae end a consumer price index differer ‘lable other mean ean lex um! certain goods nines drava by not tai that date of bare limitations index number cass of any fact dei ine change. The wy of diferent index number i diferent tuner are wufl tals to salves the conomie changes. ‘The weefulness of any index num can answer, Bach inder number ia designed fora particular its method of construction. There are generally Quantity tase pre Tae can bo apa pp i i dant ides eseirs B sca a ety ei Romer - snc ROBUEMS IN HE CONSTRUCTION OF INDE NUMBERS Pi Tadex No Methods of Constructing Index Numbers we | © | Bxi-s0 [am | wo ] Buscon0oa 70 For a Single Variable/item For a Group of Variables/items 200s 7m 159% 100-140 002 cy Bx 100-975 6 PiaedBuce Gah Bawe Simple ~eaded ws | 0 | Bxro0r | som | eo | Bxroomrs0 a ox | | Bee | om | a | Beim-s00 Simple Average of Simple Aggregative ata Matto ‘ihed wor | 60 | Serco | ams | oo | Sx100760 eae os | 0 | Berooereo | ams | ov | Sxso0=r000 | ; istration 2 Fixed Base ‘Chain Base ‘focmer Pie He eee & Bowley Find the suitable Index Number from the following data taking average price as base : : Yer [2008 | 2001 | — 2008 | 2008 | 2007 | 2000 Ge RE Pie | — 600 710 eoo_—[ — ato 00 200 Weighted Average of Relative Weighted Aggregative Method or | Saton prac or Cel es Metin Aggregative Expenditure Method Index Number taking Average Price as the Base ine Sn foro bio, the fader ur icons gown Tar Pree Tndex N= PPD ‘upber for oe varbleiem. Base period in requried fo construe: aes mune Thee © ee ae 20200 69.09% Ire Bate Method :Ta his mei th yur for whic index number een 10 now eurent yeas and the year cn we pase eee ae Px 100 16.67% tore og rent ea caren hh i he walulaton i ade soon ae 4 é Index No, = Caen Yar Pee 169 op 2005 600 ‘s09* 100 100.00% = 400 Base may be of to types: 00 $22, 00 = 6867 (@) To Take Single Year as base : ai oo Index No. = Current Year Price Py 2007 600, Gop * 100 = 100.0% ase Year Price * 100 or | 51100 800, 160 «193.308 8 if index number sto be calculate fo ving theta 2008 00 {590% 300= 188 es o08% ; a year 2000 to year tbe he year 1999 thea fr each year price of yur 1099 wil toing oe acoon SS‘SBPD Publieations Index Number 2012 EX 4, 3600. Average Price Po oF g 600 stration 3 ice of 7 years as ba “Gulalate price index by taking the average price of 7 base ero [0s [moon [2005 [2008 [20077 se | a rr 2 20 wl Solution Price of Current Year (Ps) Formula : Index of Curent Yeer=" pe of Base V 100 ~ Calculation table is ai follows : Yor Price Index No, =P 2002 u 2009 6 204 8 2005 » oa s 100% 2007 a 1358 208 ad 130% Taal WoT Be ‘Average Price (Po) = or MO= 20 Mlustration 4 Prepare index numbers for thre years with the average prices as the base Rate per Rupee in Kilograms) Yer a ‘est Cotton 2006 < 7 2007 a ‘ e f 8 25 5 Solution We are given bere ate per rope fr " ‘ ‘ale taking the bse of common aay eommodies Hence they wil changed into a Pr Tt Relatives (average Prices aa base) 20.13 2 Wheat | Coton | oy | Total “Average of PR.| index No. 100 | 52 109 204 | 67-45% 2650 | 95008 123 | s9742% be base year The formula is as follows : 0d for every year which year, ji 6 is current year, just last year tVprevious year eg., if 2007 is current year 2006 will 72008 Curent Year Price Sarent Year Bie 100 Foy ao ' uP {Link Relatives or Chain Base Index No. lex No, or Link Relatives = Yar Price 2001 150 2002 160 2008 440 2008 20 2008 130 2006 180 2007 190 2008 _ 200‘spb Publications Index Number 2034 Mlustration 6 ces of thr i Fixed Base Index Ne spe gives the average wholesale prices of three commodi a : The flloring tales ae Index Numboro with 2004 a base year 316 Chain Base Index No. from 2004 to 2008, Find Chain Base ae = 100.0% ior mood [| Yeor2005 | Year2006 | Year 2007 Tye, 392 A 3 4 5 104.259 : ra 12 16 408 5 8 10 104.08% 4 380 Solution ae Computation of Chain Base Index Numbers . 392 i Yearmoor [| _Yeor2005 | Year 2008 [Year 2007 aa ems 400 tems Tre | um. | Price | ER | Price [ te. | Price | um [Pre | ap 008 102048 T [2 [ae] s | wo] 4, fuss,” [as fe 5 nm | 6 | 10 | a | 125 | 12 |s200] a6 | 125 | ae | iy m_| 4 [10] 5 [15] 8 [160.0] 10 | 125 | a2 | im Thal LR 300 woo | ° [ass 35 ia 2004 2005 2006 2007 2008 ‘Average 00 400 4198 306 gm | EBindesNo. [80 140 190 100 20 ERED 3 3 3 3 2 Or No. 100 133. |-137.5| =125 ity | Slaton Base Conversion, Yar | Chain Base Index No Conversion Fed Base Index No (a) Change from Fixed Bazo to Chain Base : To convert fixed base index numbersicy | ~ 2004 80 = 80% chain base index numbers, the following procedure is adopted : 300, 05 140 2% ex number is obtained by following formula : ex Number 2008 130 15.6% . Index NO. 5 199 Previous year's Fixed Base Index No. 2001 100 saad Change from Chain Base to Fixed Base : wing steps are taken con cia bed ebere ints de ado sabes ne SEAS TA | ae ° oe st year's index i taken what the chain base index is bu form the bt taken equal to 100. ee ‘aes Base yar not given nthe quention Hence sre a be assumed ‘In the subsequent years, the index is obtained by following formula : ear 2008 i asuned a asa year haa FB next Example Current year’s fixed base Index Namber "= Carrent years Chain Index x Last year's Fixed Base Index seatian 9 i 00 aa From the Chain Basé Index No’. gives below, prepair Fixed Index No’s, if 2002 year is Mlustration 7 {ake as base year : From the fred base index numbers given below, prepare chain base index numbers: | Her ooz [2008 | 2004_{| 2005 _| 2008 _/_2007__2008 Yor 2003 | 2008 | e008] 2008 2s | ¢ ao 280 | 10 | 260 2007 | 2S | CR tndenar| goo | 240 | 220 ‘Fised Bose dex Na 916 | 992 ave} aap sate]yy | SBPD Publications Index Number 20.16 Solution aversion to Fixed Base Index No's from Chain Base Index Nor, ae GB. Index No onersion [Pied Base nde ‘2002 (Base Year) = a iil 100240 2008 “0 a j. 240220 sot am. a 526% 528300 = 00 sag 184% 1584 «260 a 280 ae 1435.25 435.2 160 2007 10 100 Tana 083.4 x 260 : sos a ax 2076678 ‘For a Group of Variables/Items js affected by changes in prices of various variabl jos aro constructed for a group of v simple and weighted methods. These are deseribed as und, 1d Methods : Two types of indices are constructed under it: (1) Simple Average of Relative Methot : \ ) By Fixed Base Method : First of all Relatives of every item is calculate ty t= 210 hn geet al hy nb tas. Indéx Number SS. 0 ex Number using Av ‘ont Ind using Average of Relatives Mothod Price in Yer nett 2006 tog of PR) % 10 Zao B a 1.6990 c a 1.8239 D Mo 23010 2 3 22400 Hem = La | ge = ie lox wombor wang Index number wl serge Pee See car st nanos elalivos Index No. = 2 Ind We wa (2LE8) 91.67 ap, [ 102809 ou =n(12380) = 198.33 =AL. 20796 = 118.46 fae that the calsulate value index by imple Arithmtic and Geometric Mean wil be differ for ose ‘Chain Based Method : In this method first ofall chain relatives aro se immediate provious years is taken as base for current year. Sim) ives are ealeulated which is known as Averago of Link Relatives ‘ulated by following method ‘Current average of Link Relative Previous Chain Relative 100, Chain Relatives = Ilustration 11 (Ps “The following table gives the average wholesale prices of three groups of ‘commodities for ots ts 1 tbe fears 2001 ts 2008. Compute chain base index number chained to year 2004 : Index No. = or SER Group “Year 2004 | Year 2005 | Year 2006 | Year 2007 | Year 2008 Note 1 Sometimes, Geometric mean & e T 2 3 = 7 _ Ge fans ee in ple Atma Mean Tn that ee bind zi “ 8 |\,, Relative is ealeulated and totalled and after zB . a ML 4 5 s az Ine = Ae ie ‘lustration 10 ets bse onprvding er From the flowing dat construct an index number for 2008 taking 2005 as base set" | ,Grupof || Wea iara006 | —Yeor 007 —[— War 2008 construct an index number for as base ye roup of 772008 | Year 2005 | Yeo the srerge fetes tid ung) Atti ean, Coane ne a ona ; ise7] 2 | Moo Commodity Price in yar 2005 Price in year 2008 x. [2{ mo [al i |e fim] w | ner [ae] es i a he [S| io fe] ae [elie |e | aes [ie] ts 2 Le 2 = Bae 4 ‘400 4267 3853 3162 D 0 10 ‘wage 22 84 1284 y ® 0 ‘see oft m9 1908 Chain ica ans maa | saves] [08 3080‘SBPD Publications Index Number. Index Number 20.18 td by the allowing formula: >See a a ante sept gee haa dex 100 s Sum of Prices of year 2005 «ps 100 . sam of Price of year 2008 = (Chain Index for Year 2004 = 100 Si ye Span 240 tn des or Yon 2007 = 1055 9, Sum of Prices of year 2007 «ps = 300 100 Sum of Prices of year 2008 = pa = =24598 eur 2008 =Fpu= 360 4 dex: Chain tnx Yor 2008-22381 | in Index of year 2004 = 100 = 305.20 taking 2004 as base year = 222 x 199 = 180... 499 - ndex of Year 2008, taking year = 31100 = 189.5 199 = 128.7% ach year with the : in olher wort, hei | ex of your 2008, aking 2005 a base year = 22 100 240 309-1999 divided by the sees ® i in the base year, and the quotient thus obtained is multi! as = 728, 199 = 300 9g erat gcse yc tne i uns aed na tye 207, aking 2906 bv yar= 200821006120 EP, Be 360 wy ing 2007 as base years 224 300 = 259, 100 = 120% Index Number» 2100 ind fy 2008, taking 2007 as base years 2% 100 = 292, 100 Tustration 12 i) WEIGHTED INDEX NUMBERS ; From the following dat, prepare an indox number for 2006 taking 2008 as base ; simple or non-weighted index number methods are casy and simple bt he basic ee ce methods is that all commodities are of equal importance, Ps seems to — Price Ga) if el eons dav fom Gear ery inary or exampi it | veer 2006 | Year 2008 jgr increases from € 14 per kg, to € 16,0 per kg. then its price relative will A 50. 70 00} = 120 and the rata of potter en fom 4 pork to 8 per kg. then price a & % ¢ % 80 al ve (3% 100) average of those two itoms is taken it will be D ato 20 Native will be G 109) 15. If the average Solution ( 38) 0730 Calculation of Index Number eee ae oe eee 1 increase or decrease in the prices ly exprsse hy thon indies, Co Pris 8 rhepinte tere is need to provide weights in ep There are various methods rmmodity | Year 2006 (Po | Year 2008 (Pi) teihted index numbers which are discussed in ft 2 a 50 70 | 1. CONSUMER PRICE INDEX NUMB! | 5 % 2 index number’ é = Ey 5 10 120 Beal | “Fp = 900 | ap, 60 Index Number = 225.199 = 360 , 99 _ Fai 100 « 889,309 «20% Mlustration 13 From the fillowing average price (in rupees per unt of th ies repen 2 ce Gn rupes per uni ofthe groups of commodities. Price chain index numbers using simple aggregative method : or Gevpe J ar a004 [Yr 2005 [Year 2006 | veor 07 | Weraioh T 20 30, 40. 50 60 a = 100 120 150 180 i $2 50 80. 100. 120 bsom spo satis dean index’ or ice index, are in use in different countries, with virtually n tr cx al ies onan ea a thoir meaning. Now th Cee sent Consumer Price Index Number involves consider specifi issues ‘() For which class of people, the index sho. 00 ofthe f a mi, sine Peart abla a . aa cel pois, aad fo definite Tgion with ey Hane can Peet ence the jeder numbers relate to a particular pattors fess Cnt it has reference to the period in which that pattern was prevailing. mm of expenditant fee nde acne th pac ey os se Sb i al he iy nr un ica Corina rice index numbers are sat utility is uta can pe ‘Automat od sees eee in the wage, or salary adjustments She car ty many cia geass eta ona Trai Ube ie pdtres ony yearn td Ens icc ae pre veg lene ‘the purchasing power of rupee and lex numbers are helpful in analy - no Ira em ot piensa sae POM CONSIRUCTING Consonn Bae There are oo mettnda e There arg. ether cnsructiog consumer psa inies coos od: According tet EUER #0 thio method, Consumer Price Index Num ce Expenditure Method seo ent the various ems arp ee ee ema Index Number sives are Py naive oe nif Ph ee foe Consumer Price Index Number = 2120, 199 Pao ge answor obtained by both the above methods wil be the same uustration 14 : 20.21 se method the following steps are involved i nem Wved inthe calculation of consumer price index ot! * eee his method is based upon Laspeyre's method. given weights onthe basi of quanity consumed Bt Mn i tos x cm sda ein ea ca ie Yu 20 se er Ee of price relatives, (ii) the weighted average of price relatives, rere : Tai connote | __Unt e PaO) 0) ago | Tap a fe 5 te re 3 Gea : ta a2 é Boon ¢ io = D Kes : 160 is jation Ss ying Sil Arr ie Rin nd Ayo Pe eo Wasted 5 commniten| Unie | enon | mez" | Mepamee | Fete | we i "eR A Kes. 5 200 450 225 1125, 3 |Seal § | 2 | Se | Be | Be c ‘Dosen 6 300 450 150 900, | He | | Bee esa [sve = 268 ‘Method = Jnted Average of Price Relatives 13 based on 2005 from the following data: year 2008 Group Food | Housing | Clothing [Fuct & Light | Miscellaneous 12 ao ua ue 106 10 € 2 10aun sao bins Ide Number qenregr ee tt nN ‘None Weights Wega Geant Pricvin| Pein) base Tas Product of i fi) oy cose) it | "Baw | Cae |p Pie oe a Neg Be i, ee ‘er bah Md ia Mon wit nt ma tay Cr) fale : a fe ° al 106 sq = i000 Soles 0 sty ins |e aa Tal B#, | gaint | WPR) 1672 nate HD ue Blsscturss] 37 tH t pot = Ties 3 costo living index number forth fsokss. fig. a nat a a ee Fay Beet Mel yy | Lots fee = ant Br ee od Fey Bet fee, ea = uatty Price in Base | Price roost [1 = am ats | Unt i fam | a wee | Ser Ye Rice ‘Squintals Quinta u » Vist tesa | Qt 6 * Liaise Paes ‘auiatals Quintal 2 16 fon 7 ata by ogy ‘Ghee ip. ig 5 oa Do cet of Living nec uber fe e206 ene hed o hs % “ » saasaniet —_—________ Coin | Pepe eas | eoeeeeien Me : 3m tet —_| Smtr | dency | Unt Firewood ‘Wquintals Quinta 2 20 = Hower | 1 Hesse » s | me a agente Ries 2 Solution Expenditure Metbod iy ry 0 Genty | re ae a sae (eae) ot |e] Cet | adie | at, | Gh peo = fete ar | Ba Core er Mise toa) Py | ey Poay) Pig. | lution Relative Rie ‘Squiatels) Quintal] 24 @ 20 160, FA gagg | WHPR Wa igi || as | 6 2 te oy Pulte a |e 4 # 28 on Ge file | es | os] an Ei = 1» sato ot fm ot a | sl ow Fe a can ting Yoseen | weer | 1 | ton | “te @ is 8 Femad ioqinate|aicit| 2 | gap | 3 8 7 ‘0 Howetast|1 | owe | 29 | 2» B a ry ia ~~. a | [SWPR = 25320 Inder Note cae yar 2g | an “pombe,a ae ron the flowing ata, enlelate price forthe year 2008 by using geometric meg, “Average: Average Pee : Cnn, ‘Year 2007 (Base) Yeoraion et 14.2 5 32 Ma ¢ 1 a D 36 as 2 a7 rn r 1000 Be aking 2008 base year and 2007 as eurrent ‘Now reverse the process taking 2008 base yo Year and shop the bo esl ae Sy itt & Solution Rs Fri nats Pre Average | Average | Relatives i ives for Commodity | Prise eer | Price Year | ‘Year 2008 Year 2007 | log ‘2007 | 2008 -.:} with Year | — ® with Year |. Bo 2007 a8 base 2008 as base a ua | 8620 | 29055. | auss8 | —29q, 3 a7 | 9450 | tore7 | ios7s ¢ xs | som | rare | 2080 D 43 | asm | tear | Heer z 4 | ness | 20588 ‘S731 F nro | i100 | 20682 B47 Ne6 116992 Index Number for 2008 2007 as base) (og Ry tag t= OOEPD poet of 8902 anstog of 1.9802 96 200% Index Number for 2007 2008 as base): sent Aang OD poptg of 2101. antag of 20169 = 1040% ror wb sity onset they te oh Tne Rover Tt pis, Be Index Number Stoo Construct of Index Number of Business Activity Weighose (WT indectomy | WER 36- 250 9000 . 135 945, 24 2 4800 » 135 2700 7 = 2216 6 300 1800, Biv = 100 [sive 21820 osiness Activity =2HPR _ 21800 _ rndex No of Bsinss Any «NPR 2180 ois, Index of Business Activity Using Geometric Mean Index (PR) fog (PR) Ww ‘tog (PR) x W_ 250 20019 we] esanaa 135 21303 7 149121 200 2.3010 or 55-2240 135 21903 20 42.6060 825 25119 7 115833 200 2am. é es 00 | 3 og 7) Tiveawo [log PR <3 Indes No, = A. 1 25224 1, a9151 2065 Second Index is better. Fa 2, OTHER WEIGHTED METHODS = ‘There are some other weighted index number metheds which are known by es echolars, These are as follows: eet () LASPEYRE'S METHOD "rot, Laspeyre has treated base year quantity (go) as the isin aggregate expenditure method, Formulas: i 2PM «100 Laspeyre's Index No. (Ley) * $P9, sreighte for both the years as it sco; qo=Base year quantity 00 "199°"? Py=Current year price; Po=Base year priee; ao=Base year a Mlustration 19 Mastration 20 + agindex fsa material pics fr your 2008 compared Construct the index number of business activity i 7 ey ‘Abuilding firm wishes to construct an indox fray nares Po a eee following. ‘Ache Mean ad See basins activity ia Tada from the allowing dats ie qutean Bice te ede Nebo 6 Lar Tem om rihation + ager [ag 1 Tnduateal prodacdon ee Jade i ear OD) | Prt ‘Gooe) 2. Mineral production 7 (Gn rppreximate unit 10 16 3. Internal rade a 135 8 a 4 Financial activity 3 200 3 6 5: Bxpores and imports 0 135 2 3 6. Shipping activity Z 3s iVy ii Solution Tr Pris in yer | Pres gear | Value in year 7 Quentin Presse | Gone) | O03) oN — ene. | 7 0 ey Poa) ee a 5 a—} a2 2 a Bricss a . a 14000 18000 ‘aber 0 % é 7500 Ur pete 2 3 Tro 0 Bed . i 4 700 3 ual 00 2829 TLaspeyres Index Number fr year 2008 (year 2003 as base) 49650 =F 00 = ggg % 100 = 126 70% Miustration 21 Calelte th weighted price index fom the fllowing data by Laspeyras Methad Meters Quanty Prices during joe Unit Required in gear 2003_ Fearon | Cement 700s. 001s. 60) an | Tinber a. 2000 95 | ua Sted emt 50 ort. so | ao Bricks: per 000 20000 120 uo | Solution Pris faterials i juni Mawilt | ni |ingear 3605] or 2003 | Yeor2008°] Pegg a Po PL Pa Geneatiodiie. | soi 50 30 35 @ Ber fs fmt | 88 |e | sscoo | ath & 0 Bs__[eroo lots wo | ste | "20 |e zoes | aueen | ‘Laspeyre’s Weighted price index for year 2008 = 220 x 199 | Poo | 31020 = 2022 «100 « ur 90% © PAASCHE’S METHOD Passche's method is more usted than La se ae speyre’s fs current year quantity (7) | treated ‘weight for both the years. The formula of: sche's Method a Peasches Index No, Pp, «2218 x 199 i *a" Pon | ‘Where, Pi= Current year price 1 Current year quantity ‘Po= Base year price Index Number ee 008 aches Pic Tn " se Pnees is ne onaga we in unit hems (2008) [Pee Rupees per nit 3 Year 2004 Year 2008 ___ %5 30 ba - rs 20 . . 8 25 a 2 6 A 8 10 z 4 5 Panschi’s Index No, Qh; innit | pre ingame sms | 00 | PEAS | Paste” | Pas 8 3 @ a0 200 i 20 % 20 400 300 be 5 8 5 15 0 y 3 2 15 5 26 pe 2 8 rr 2 6 ie 1 4 5 5 4 = = ee Te Pin Pansehis Index No. Pry = Fp « ‘This method is termed as best met Weal Index Number. Following formula is Fisher's Index No. Fp,,= Py =Base year price and, Fisher's Index No.= Poo Here, P, = Current year price c= Curent ear gsaty o=Bate ear quant n Sox No {Lespeyras Formula x Paasche’s ‘Formuta x 100 Pua Erte, Fh 100 [SHER'S METHOD {or index numbers s0 it is also known as Fisher's 835 199 100 or 818 x 100= 120.25% Fpg= Mp ™ Pr *100 Mestration ne tion umber or yar 2008 enh bn er 200 by Fisher's formal ‘from the data given below Your 2002 Year 2008 Arise Pre Quantity Price Quantity T 3 10 4 2 1 : 6 7 1 a é 3 5 4oe fiay_srpmennsntetie Indes Number | jon 25 = slowing data, construct an appropriate i th re fol propriate index number by Marshall-Eageworth 7 2 Garren ear it Ta antl ot 7” 20 r 20 2 iso x ii 10 3 Pr “ eS a : a at | pier formal tien hia test ean be proved tha: ‘Base Year Current Year \ Boao , Peet ters|pae ; a 190" Puan 7) @. Po lquantity (gy? | 2% | Pit0 | nay fePigo , SPigs , ZPoqo, ZPoqt _ A Fy 5 “400 56 | 250 | 560 | S00 | om ParxP10= \ Pogo” Pons * EPigo < FPigi c| # | Be Whe Price Index for cute yearon the bass of base yea. D| uo 3 dab ncngD lvigen'| cae Pio Priee Index for base year onthe basis of current year- ae 4 100 s_| 280 | 60 FACTOR REVERSAL TESTS 1400 | 2006 Laspeyre's Index Number, ox = 2242 199 - 1.898 on = BEE 100 = $498 x 100 = 99.71% Pose Indr Number, r= BLED 1002098 109 00.70% andy and qo the quantities ofthe current and diane inthe price in the curent year sa P10} epeye value ratio) or [Pox x Qo1 = Vor! ai gr = SE rae vl rati) o- [Pos x Qos = Vo ‘on the basis of base year. far a the basis of base year. Where, "Po = Price Index for current year ‘@o1 = Quantity Index forthe cureat ‘Pi = Prices of the current year, Po= Prices of the base current YearPago EPoq0 EPigo Pega practical index to comput Another test of adequacy suggested by Westrguard and highly favour is met by isan extension of Tine Reversal Tet 8 gabe tase perid, anther index ner i computed be 2 lex number is computed for period 3 on i, and so oa ‘equal to 1. Sjmbolicaly : continue to rely upon simpler alt Snag sy ey spl ahegh per is compen use okey to roma highly limite, SBPD Publications Index Number Index Number 2035 Paya 2am fe Po“ a0” SPoa0 Base Yer oe Pol | A ; P “EE sod gre mele a= 3 a) let 00 | 600 B 4 60 6 200 mg Pith x) 2a , BPs é a | ee 2/2 EP ~ YEPoqo EPiqo a 40. x 2 |e i rer Rat = Panne 7200 Poo * Pog P= ‘Por x Pio = igh perl ‘THE CIRCULAR TEST of an Index Number formula is M, practically none of index numl base period 2, and PorxPiax Poo =1 " Pia ecior Reversal Tost = Poi Xqo1= Epa poi=\ EE Ea - = NV EPoqo * EPogi ‘Pogo " EPigo bat {ja60 “1360 “1960 ~ EPoq0 INDEX NUMBER AND PROBLEMS Quantity Index Number Mustration 30 ‘Compute by Fisher's formula Quantity Index Number rom the following data : 1360 1880 1880 _2PI0¥ verted From the flow 5 rm Pree Value © na ng data calelate Fisher’ FeO factor—Reversal and Time Rewesent Reeegeer® Heal Index Number. Does it satisfy both = 3 4 e Conmatiy, 8 : 2007 Base Year % 5 2 Price a 2008 Current Year 2 2 : a ve quanttios of commarities ae not given, hene, to find out quantities e 2 ia ” aol rte : ~ 2 Py a Po oP o oP. oP, D s 60 é = 7 | © 50 48 40 a fA 7 56 48 49 42 = 5 © Fe is L 4 24 18 20. 1 < = —t— EnPo | SaPo | SaPi | Sao bus | 2s | Zan |e