Index numbers
- 2. INTRODUCTION Economic and business data change from time to time.For instance,prices of all commodities do not remain constant.It is possible that sometimes price of a commodity rises and sometimes falls. The measurement of such changes is possible only by means of some statistical methods.Index numbers are such statistical devices which help in the measurement of such changes.For eg:- prices going up or down,industrial production is rising or falling or whether exports are increasing or decreasing.
- 3. DEFINITIONS Index Numbers are devices for measuring diffferences in the magnitude of a group of related variables - Croxton & cowden An Index Number is a statistical measure designed to show changes in a variable or a group of related variables with respect to time,geographic location or other characteristics. -Spiegel
- 4. USES OF INDEX NUMBERS To simplify Complexities Helpful in fixation of salary and dearness allowance Helpful in Predictions Helpful in Comparisons To measure purchasing power of money Useful in business
- 5. LIMITATIONS OF INDEX NUMBERS Index numbers measure relative changes in different phenomenon.Index nubers are true only on the averages. A given type of index number is not suitable for all purposes.Multipurpose index numbers cannot be constructed.
- 6. CONT’D No consideration is given to the changes taking place in the quality of a commodity while constructing the index numbers. Bias in the selection of base year and selection of representatives sometimes leads to misleading results. Index numbers lack in perfect accuracy because they are mostly constructed on the basis of sample commodities.
- 7. TYPES OF INDEX NUMBERS Price index numbers a) Wholesale price index number b) Retail price index Quantity index number Value index numbers Sample and Aggregative index numbers a) Simple index numbers b) Aggregative index numbers Cost of living index number Special purpose index numbers
- 8. PROBLEMS IN THE CONSTRUCTION OF INDEX NUMBBERS Purpose of index number Selection of items Selection of prices Selection of base year Selection of weights Selection of an average Selection of an appropriate formula
- 9. THANK U