Most of the economic business phenomena change over a period of time,
from one region to other,etc. We may be interested in comparing economic
condition over time or space. An index in its simplest from requires a
comparison of two values of the same series at different time periods.
The comparison is done by making a ratio of the two values.
Definition: Index number is a pure number which measures the relative change of price or quantity or value of commodity or a group of commodities of a particular year called current year with respect to base year.
Characteristics of index number:
Uses of index number:
➤Index number are used as economic barometer.
➤Index number help in studying trends and tendencies of price, sales etc.
➤Index number help framing decision & policies.
➤Consumer price index or cost of living index numbers are particularly used for-
Definition: Index number is a pure number which measures the relative change of price or quantity or value of commodity or a group of commodities of a particular year called current year with respect to base year.
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| United States Consumer Price Index 1913-2017 |
Characteristics of index number:
- Index number are a specialized types of average.
- It is a pure number.
- It is always expressed in percentage.
- Index numbers measure the changes in the level of phenomenon.
- Index number measure the effect of change over a period of time.
Uses of index number:
➤Index number are used as economic barometer.
➤Index number help in studying trends and tendencies of price, sales etc.
➤Index number help framing decision & policies.
➤Consumer price index or cost of living index numbers are particularly used for-
㇃Formulating economic policy, adjusting income payments & measuring real earning.
㇃Measuring the purchasing power of money.
㇃Wage negotiations and wage contracts.
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