What is an index number in statistics?
An index number is a statistical device for measuring changes in the magnitude of a group of related variables. It represents the general trend of diverging ratios, from which it is calculated. It is a measure of the average change in a group of related variables over two different situations.
What are the three types of index number?
There are three types of index numbers which are generally used. They are price index, quantity index and value index.
What is index number PDF?
Index number measures the average change in a group of related variables over two different situations such as prices of a specified list of commodities, the volume of production in different sectors of industry, production of various agricultural crops, cost of living, etc.
What are the applications of index number?
In Economic Policies: Index numbers are helpful to the state in formulating and adopting appropriate economic policies. Index numbers measure changes in such magnitudes as prices, incomes, wages, production, employment, products, exports, imports, etc.
What is index number in statistics?
118 STATISTICS FOR ECONOMICS Recap • An index number is a statistical device for measuring relative change in a large number of items. • There are several formulae for working out an index number and every formula needs to be interpreted carefully. • The choice of formula largely depends on the question of interest.
Why are index numbers expressed in terms of percentages?
Index numbers are expressed in terms of percentages to show the extent ofrelative change. Index numbers measure relative changes. They measure the relative change inthe value of a variable or a group of related variables over a period of time orbetween places.
What are the various price index numbers used in policy making?
Wholesale price index number (WPI), consumer price index number (CPI) and industrial production index (IIP) are widely used in policy making. • Consumer index number (CPI) or cost of living index numbers are helpful in wage negotiation, formulation of income policy, price policy, rent control, taxation and general economic policy formulation.
What is the purpose of estimating index number?
CONCLUSION Estimating index number enables you to calculate a single measure of change of a large number of items. Index numbers can be calculated for price, quantity, volume, etc. It is also clear from the formulae that the index numbers need to be interpreted carefully.