index numbers OF CLASS XI STATISTICS - COMMERCE

INDEX NO CLASS 11

1. BIJU P M PGT ECONOMICS KV
2.KOCHI

3. We can measure the change in the prices of vegetable oil and tea in
two ways:
(a)Actual Difference
(b)Relative change (Price Relative)
A. Actual difference = Current year price (-) Base year price
Rs.80 Rs.40(-) = Rs. 40
Rs.150
Rs.100= Rs.50(-)

4. B. Price Relative =80 –40 / 40=1(actual difference / base year price
For Tea = 150-100 / 100 =0.5
This change can be expressed in percentage :
for Vegetable oil : 1 X100 = 100%
For tea : 0.5 X 100 = 50%
Price Relative symbolically -
P1
P0
___
X 100
P1 = Price of the current year (2010)
P0 = Price of the base year (2000)
80__
40
X100= 200
150___
100
X100= 150

5. Index Numbers –Meaning and
Definition
Index numbers are used to measure changes in group of items
that are related to each other.
The changes measured are time to time or place to place or
From one commodity to another. They are usually expressed
In percentages.
According to Blair : Index numbers are a specialized type
of averages.”

6. Characteristics of Index Numbers
Expressed in
numbers :
Expressed in
percentages
Relative
Measure :
Universal
Utility
Comparative
Measurement :

7. Uses OR importance OR Advantages of Index
Numbers
1.It simplifies
complexities : Ex.
Sales,Volume of
imports or exports
2. It
facilitates
comparative
study :
3. Use in
business sphere
:
4. Helpful in fixation
of salary and
allowances :
5. To measure
the changes
in the value of
money :

8. Problems in the construction of Index
Numbers
1.The purpose of Index Numbers :If monetary wages of
worker then we should construct Retail price Index, If we want to get
knowledge regarding changes in money value, then Wholesale price Index
should be constructed.
2. Selection of Commodities :The exact number and types of commodities to be
selected for the construction of an index number depends on the purpose for which
the index number is to be used. The selection commodities should be represented
of the group for which the index number is to be constructed.E.g.-If we want to
construct CPI we should include the retail prices of those good which are important
in the family budget and in the construction of WPI (whole sale price index) we
should include whole sale prices sum then measures industrial and agricultural
commodities and other good services.
3. Selection of Base Year :Comparison is made between time periods and
different places so, a base year is identified which should not be too long or too
short, free from abnormalities or irregular fluctuation. Such as
riots,war,flood,earthquake etc.Base year should be shifted from time to time.

9. 4. Selection of representative Prices :
Both kind of prices should be used depends on the purpose of
which the index number is to be constructed.
E.g.-If we want to measure changes in general price level .
5. Selection of weighting methods :
weighting may be according to value or quantity.
6. Selection of Appropriate Averages :
such as Arithmetic mean ,median, mode, geometric mean, which
Can be used in the construction of Index Numbers. But in practice ,
only Arithmetic mean and geometric mean are recommended.