## Importance of index numbers

A simple index number is a number that measures a relative change in a single variable with respect to a base. Composite Index Number A composite index number is a number that measures an average relative changes in a group of relative variables with respect to a base. The selection of the base period is the most important step in the construction of an index number. It is a period against which comparisons are made. The base period should be normal and free from any unusual events such as war, famine, earthquake, drought, boom, etc. It should not be either very recent or remote. An Index number helps in the calculation of percentage change in a phenomenon with respect to a base parameter making the comparison of data much more convenient. The knowledge of index number comes in very handy for working with a complex set of data. Simple index numbers grant equal importance to all items no matter what share it has. In other words, it considers each item to be equal with respect to the given variable. Consequently, it is a simple average and is less accurate when compared to the other class of index numbers. Consequently, many different index numbers have been developed for special use. There are a number of particularly well-known ones, some of which are announced on public media every day. Government agencies often report time series data in the form of index numbers. For example, the consumer price index is an important economic indicator Index Numbers: Methods of Construction of Index Number! An index number is a statistical derives to measure changes in the value of money. It is a number which represents the average price of a group of commodities at a particular time in relation to the average price of the same group of commodities at another time.

## Consequently, many different index numbers have been developed for special use. There are a number of particularly well-known ones, some of which are announced on public media every day. Government agencies often report time series data in the form of index numbers. For example, the consumer price index is an important economic indicator

27 Jul 2012 Obtain information from the internet or other reliable sources on the importance of two different types of index number of your choice. Elaborate 1 Jan 2009 Hedonic regression; Index numbers; Price dispersion. Author's E-Mail neglected and important index number issue. Say, for example, the 8 Aug 2016 As an accountant it is important to not only recognise what a change in index number represents but also the driving factor behind the change. An index number becomes a weighted index when the relative. Page 4. 110. STATISTICS FOR ECONOMICS importance of items is taken care of. Here weights be the estimated relative importance of a product. There are several types of indices defined, among them those listed in the following table. index, abbr. formula. a good index number formula should satisfy. The most fundamentally important test among those already treated in his earlier study,. Fisher (1911), is the 'time Index number is a number which expresses the relative change in magnitude of a They assign equal importance to all the items included in the index and as

### 8 Aug 2016 As an accountant it is important to not only recognise what a change in index number represents but also the driving factor behind the change.

17 Mar 2018 Some Important index numbers: (i) Consumer price index (CPI): CPI is also known as the cost of living index, measures the average change in

### The base value represents the weighted-average stock price of all the stocks that make up the index. The index number has much less importance or meaning

Index numbers possess much practical importance in measuring changes in the cost of living, production trends, trade, income variations, etc. Index. Image

## iii) Timings of Data Collection: It is also equally important to collect the data at an appropriate time. Referring to the example of consumer price index, prices are

While constructing an index number due weightage or importance should be given to the various commodities. Commodities which are more important in the If index numbers were used only to compare such variables as the price of a where q,i is a quantity of commodity i showing its general importance in the list of 27 Dec 2015 Index numbers are a simple way of making it easier to compare numbers over a period of time. Index numbers measure relative changes in the 27 Jul 2012 Obtain information from the internet or other reliable sources on the importance of two different types of index number of your choice. Elaborate

Index numbers possess much practical importance in measuring changes in the cost of living, production trends, trade, income variations, etc. Index. Image Effectively, it helps the government formulate the price policy, fiscal policy, taxation policies etc. In other words, these indices help the government to take Uses of Index number: Index numbers has practical significance in measuring changes in the cost of living, production trends, trade, and income variations. Index