INDEX NUMBERS - All methods & formulae

 INDEX NUMBERS

Index numbers are convenient devices for measuring relative changes of differences from time to time from place to place. Just as the arithmetic mean is used to represent a set of values, and index number is used to represent a set of values over two or more different periods or localities.

DEFINITION: An index number is a ratio or an average of ratios expressed as a percentage, two or more periods of periods are involved, one of which is the base time period. The value at the base time period serves as the standard point of comparison.

An index time series is a list of index numbers for two or more periods of time, where each index number employs the same base year.

Classification of index numbers

On the basis of subject:

  1. Price index 
  2. Quantity index 
  3.  Value index 
  4.  Special purpose index

 On the basis of number of commodities used in the construction of index numbers:

1.Simple index numbers.

2.Composite or Aggregate Index numbers.

METHODS TO CONSTRUCT INDEX NUMBERS.

  1. Simple aggregative.
  2. Simple relative.     —   AM  , GM
  3. Weighted aggregative 
  4. Weighted relative.    —  AM  ,  GM
  5. Laspeyre's method
  6. Paasche's method 
  7. Fisher's method 
  8. Dorbish & Bowley's method
  9. Marshall Edge worth method

Here is the list of index numbers and their formulae.




















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