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This document discusses index numbers, which are used to measure changes in variables like stock prices, cost of living, and production over time. It defines index numbers and describes their key features and characteristics. The document also outlines different types of index numbers, such as simple, composite, price, and quantity indexes. It then explains methods for constructing index numbers, including aggregate and relative methods. The document lists advantages and limitations of using index numbers. Finally, it discusses main problems in constructing index numbers, like defining the purpose and selecting the base year, goods/services, and price type.
power point presentation on Types of index no
- 1. Types of Index No STATISTICS PRESENTED BY- DEPARTMENT: BACHELOR OF BUSINESS ADMINISTRATION YEAR:1ST, SEM:1 NAME: SOUMYAJIT BANERJEE STUDENT CODE: BWU/BBA/18/020
- 2. CONTENTS – WHAT IS INDEX NUMBER? – FEATURES OF INDEX NUMBER – CHARACTERISTICS OF INDEX NUMBER – TYPES OF INDEX NUMBERS – METHODS OF CONSTRUCTING INDEX NUMBERS – AGGREGATE METHODS – RELATIVE METHOD – ADVANTAGES OF INDEX NUMBER – LIMITATION OF INDEX NUMBER – MAIN PROBLEMS IN THE CONSTRUCTION OF INDEX NUMBER
- 3. WHAT IS INDEX NUMBER? – AN INDEX NUMBER IS THE MEASURE OF CHANGE IN A VARIABLE (OR GROUP OF VARIABLES) OVER TIME. IT IS TYPICALLY USED IN ECONOMICS TO MEASURE TRENDS IN A WIDE VARIETY OF AREAS INCLUDING: STOCK MARKET PRICES, COST OF LIVING, INDUSTRIAL OR AGRICULTURAL PRODUCTION, AND IMPORTS. INDEX NUMBERS ARE ONE OF THE MOST USED STATISTICAL TOOLS IN ECONOMICS.
- 4. FEATURES OF INDEX NUMBER: – 1. MEASURES OF RELATIVE CHANGES: INDEX NUMBER MEASURE RELATIVE OR PERCENTAGE CHANGES IN THE VARIABLE OVER TIME. – 2. QUANTITATIVE EXPRESSION: INDEX NUMBERS OFFER A PRECISE MEASUREMENT OF THE QUANTITATIVE CHANGE IN THE CONCERNED VARIABLE OVER TIME. – 3. AVERAGE: INDEX NUMBER SHOW CHANGES IN TERMS OF AVERAGE.
- 5. CHARACTERISTICS OF INDEX NUMBER – EXPRESSED IN NUMBER: INDEX NUMBER CAN BE EXPRESSED IN NUMBER ONLY, THOUGH THE CHANGES CAN BE EXPRESSED IN WORDS ALSO, LIKE PRODUCTIONS IS INCREASING, PRICES ARE DECREASING. BUT THE INDEX NUMBER EXPRESSES THESE CHANGES NUMBERS. – EXPRESSED ON AN AVERAGE: INDEX NUMBER PRESENTS THE CHANGES ON AN AVERAGE BASES. THESE ARE GENERALLY USED TO EXPRESS THE CHANGES IN A GROUP OF VARIABLES AND NOT OF A PARTICULAR VARIABLE OR COMMODITY, IF THE PRICES OF SOME COMMODITIES ARE INCREASING THERE MAY BE AT CONSTANT LEVEL.. – SPECIAL TYPE OF AVERAGE: INDEX NUMBERS ARE OF SPECIAL TYPE OF AVERAGE BECAUSE IN SIMPLE AVERAGE DATAARE UNIFORM AND THEIR UNITS ARE ALSO EVEN. WHERE IN INDEX NUMBERS THE DATA HAVING DIFFERENT MEASUREMENT UNITS ARE USED. – COMPARATIVE NATURE: THE INDEX NUMBERS ARE COMPARATIVE IN NATURE BECAUSE THEY MEASURE RELATIVE CHANGES AND RELATIVE CHANGES ARE COMPUTED ON THE BASIS OF SOME OTHER DATA SO IT CAN BE SAID THAT INDEX NUMBERS ARE COMPARATIVE. – UNIVERSAL UTILITY: GENERALLY INDEX NUMBERS ARE USED TO MEASURE THE CHANGES IN PRICES IN THE GROUP OF ITEMS BUT THE CHANGES IN THE QUANTITY OF AGRICULTURAL PRODUCTION, INDUSTRIAL PRODUCTION, IMPORTS, AND EXPORTS CAN ALSO BE MEASURED THROUGH INDEX NUMBERS.
- 6. TYPES OF INDEX NUMBERS • SIMPLE INDEX NUMBER: A SIMPLE INDEX NUMBER IS A NUMBER THAT MEASURES A RELATIVE CHANGE IN A SINGLE VARIABLE WITH RESPECT TO A BASE. THESE TYPE OF INDEX NUMBERS ARE CONSTRUCTED FROM A SINGLE ITEM ONLY. • 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. A COMPOSITE INDEX NUMBER IS BUILT FROM CHANGES IN A NUMBER OF DIFFERENT ITEMS. • PRICE INDEX NUMBERS: PRICE INDEX NUMBERS MEASURE THE RELATIVE CHANGES IN PRICES OF A COMMODITY BETWEEN TWO PERIODS. PRICES CAN BE EITHER RETAIL OR WHOLESALE. PRICE INDEX NUMBER ARE USEFUL TO COMPREHEND AND INTERPRET VARYING ECONOMIC AND BUSINESS CONDITIONS OVER TIME. • QUANTITY INDEX NUMBERS: THESE TYPES OF INDEX NUMBERS ARE CONSIDERED TO MEASURE CHANGES IN THE PHYSICAL QUANTITY OF GOODS PRODUCED, CONSUMED OR SOLD OF AN ITEM OR A GROUP OF ITEMS.
- 10. ADVANTAGES OF INDEX NUMBER – 1. MEASUREMENT OF CHANGE IN THE PRICE LEVEL OR THE VALUE OF MONEY: INDEX NUMBER CAN BE USED TO KNOW THE IMPACT OF THE CHANGE IN THE VALUE OF MONEY ON DIFFERENT SECTIONS OF THE SOCIETY. – 2. KNOWLEDGE OF THE CHANGE IN STANDARD OF LIVING: INDEX NUMBER HELPS TO ASCERTAIN THE LIVING STANDARDS OF PEOPLE. MONEY INCOME MAY INCREASE BUT IF INDEX NUMBER SHOW A DECREASE IN THE VALUE IF MONEY. LIVING STANDARD MAY EVEN DECLINE. – 3. ADJUSTMENT IN SALARIES AND ALLOWANCES: COST OF LIVING INDEX NUMBER IS A USEFUL GUIDE TO THE GOVERNMENT AND PRIVATE ENTERPRISES TO MAKE NECESSARY ADJUSTMENT IN SALARIES AND ALLOWANCES OF THE WORKERS. – 4. USEFUL TO BUSINESS COMMUNITY: PRICE INDEX NUMBERS SERVE AS A USEFUL GUIDE TO THE BUSINESS COMMUNITY IN PLANNING. – 5. INFORMATION REGARDING FOREIGN TRADE: INDEX OF EXPORTS AND IMPORTS PROVIDES USEFUL INFORMATION REGARDING FOREIGN TRADE.
- 11. LIMITATION OF INDEX NUMBER – 1. NOT COMPLETELY TRUE: INDEX NUMBER NOT FULLY TRUE. THE INDEX NUMBER SIMPLY INDICATE ARITHMETICAL TENDENCY OF THE TEMPORAL CHANGES IN THE VARIABLE. – 2. INTERNATIONAL COMPARISON IS NOT POSSIBLE: DIFFERENT COUNTRIES HAVE DIFFERENT BASS OF INDEX NUMBERS; THESE DO NOT HELP INTERNATIONAL COMPARISONS. – 3. DIFFERENCE OF TIME: WITH THE PASSAGE OF TIME, IT IS DIFFICULT TO MAKE COMPARISON OF INDEX NUMBER. WITH THE CHANGING TIME MAN’S HABITS. – 4. LIMITED USE: INDEX NUMBERS ARE PREPARED WITH CERTAIN SPECIFIC OBJECTIVE. IF THEY ARE USED FOR ANOTHER PURPOSE THEY MAY LEAD TO WRONG CONCLUSION. – 5. LACK OF RETAIL PRICE INDEX NUMBER: MOST OF THE INDEX NUMBERS ARE PREPARED ON THE BASIS OF WHOLESALER PRICES. BUT IN REAL LIFE, RETAIL PRICES ARE MOST RELEVANT, BUT IT IS DIFFICULT TO COLLECT RETAIL PRICES.
- 12. MAIN PROBLEMS IN THE CONSTRUCTION OF INDEX NUMBER: – 1. PURPOSE OF INDEX NUMBER: THERE ARE VARIOUS TYPES OF INDEX NUMBER, CONSTRUCTED WITH DIFFERENT OBJECTIVES. BEFORE CONSTRUCTING AN INDEX NUMBER, ONE MUST DEFINE THE OBJECTIVE. – 2. SELECTION OF BASE YEAR: SELECTION OF BASE YEAR IS ANOTHER PROBLEM IN THE CONSTRUCTION OF INDEX NUMBER. BASE YEAR IS THE REFERENCE YEAR. IT IS THE YEAR WITH WHICH PRICES OF THE CURRENT YEAR ARE COMPARED. – 3. SELECTION OF GOODS AND SERVICES: HAVING DEFINED THE OBJECTIVE, THE PROBLEM IS OF THE SELECTION OF GOODS OR SERVICES TO BE INCLUDED IN THE INDEX NUMBER. – 4. SELECTION OF PRICE: WHETHER WHOLESALE OR RETAIL PRICES ARE USED IS ALSO A PROBLEM IN CONSTRUCTION OF INDEX NUMBER.
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