TYPICAL PERIOD INDEX There is no any valid for selecting the base period prices and quantities or the

current period prices and quantities current period prices and quantities for the weights. Therefore instead of using weights related to base and current periods, one can use the prices and quantities related to a typical period as weights. Such an index is known as Typical Period Index A typical period should be selected so that it would represent the importance being typical in relation to the problem under consideration. For example, when inflation is under consideration, a year with high price fluctuation could be used as a typical year. Typical Period Price Index Formula Where; : Price in the current/given year : Price in the base year : Quantity in the typical year Typical Period Quantity Index Formula Where; : Quantity in the current/given year : Quantity in the base year : Price in the typical year Example: Quantities of three kinds of shares issued by a certain organization and their prices are given in the following table. Since there had been high price fluctuation in the year 2007, taking it as the typical year and taking 2006 as the base year , Kind of Shares A B C Price 2006( 20 15 10 ) 2007 ( ) 2008( 24 18 15 21 15 12 ) 2006( 90 95 80 and Quantities(Shares) ) 2007( ) 2008( 100 105 95 95 100 90 )

calculate the typical period price index for 2008 calculate the typical period quantity index for 2008

= 106.41%

Interpretation: The prices of the shares have gone up by 6.41%.

Interpretation: This shows a 7.10% increase in the quantity of shares issued.

CHANING THE BASE YEAR OF AN INDEX (BASE SHIFTING) 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 time. For example changes may happen due to disappearance of old items, inclusion of new ones, changes in weights of items etc. To convert indices from an earlier to a later base year, divide all the indices by the index for the new base year. Example: The following indices have a base year of 2005 = 100 Year 2005 2006 2007 2008 2009 100 115 126 142 165 Index Convert the above indexes to base year 2006 = 100 by dividing each index by 115 (2006 index) and multiplying by 100. Year Index 2005 2006 2007 100 2008 123 2009 143

CHAIN BASE INDEX NUMBERD A chain base number gives the relative value of an item using the previous year as the base year. A chain base index number tells you the annual percentage change. The increase and decrease in price are always relative to the previous year. The base year changes for each calculation.

Example: Year 2007 Fixed Index (Base = 2007) 100 Chain Base Index

2008

105

2009

115

2010

130

2011

150