Index number Contents #➢ Relation between two figures ➢ Measurement of changes / variation in market (economic factor) ➢ Measurement of changes in price, quantity, production, ➢ It is expressed in terms of % ➢ Meaningful information by index number ➢ Father of index number = Professor / famous Statistician CARLI in 1764 in ItalyIntroduction of Index NumberMeaning of Index NumberCharacteristics of Index Numbers:1. Index numbers are specialized averages2. Index numbers are expressed in percentages3. Index numbers measure changes not capable of direct measurement4. Index numbers are for comparisonPurpose, Importance and Uses of Index Numbers:1. To measure and compare changes2. To measure the purchasing power of money3. Helpful in policy formation4. Helpful in studying trends5. Helpful in deflating various values6. Act as Economic barometersLimitation of Index Numbers:1. Estimate measurement of relative changes2. Lack of Accuracy3. Difference in Purpose4. Other LimitationsKinds of Index Numbers:1. Price Index2. Quantity index3. Value index4. Special purpose indexMethods of Constructing index Numbers:For a Single Variable/ItemFixed Base Method: 1. Single Year Fixed Base Method 2. Fixed Year Average Base Method Base conversion:1. Conversion from fixed base to chain base 2. Conversion from chain base to fixed baseWeighted aggregative method:Fisher's Ideal index NumberSome Extra Names of Fisher's Index Number ➢ Ideal Index Number ➢ Suitable Index Number ➢ Appropriate Index NumberWhen price per unit or quantity is not given in questionReversibility Test1. Time Reversal Test 2. Factor Reversal TestPaasche's index NumberLaspeyre's index NumberDorbish & Bowley's index NumberMarshall - Edgeworth's index NumberFamily Budget or Weighted Average of Price Relatives MethodSome Important MCQ's for Revision.