Index Numbers — Economics STD 12 Commerce / Arts — Question

• According to Spiegel, index number is, “a statistical measure to show changes in variable or a group of related variables with reference to time, geographical location and other characteristics such as income, profession, etc.”
• Croxton and Cowden defines index numbers as, “a device for measuring difference in the magnitude of a group of related variables.”
• According to Bewley, “Index Numbers are used to measure the changes in some quantity which cannot be observed directly. ”

(B) Meaning:
An index number is a specialised average which measures percentage changes in a variable (or a group of variables) over a specified time. When we say that the index of the whole sale price for the year 2018 is 125, taking the base year as 2015, it means that there is an increase of the wholesale price by 25%. Hence, index numbers are used to measure general changes

(C) Features of Index Numbers :

• Index numbers are a specialised form of averages.
• They are expressed in percentage form without using a percentage sign.
• The year for which index number is being prepared is the current year.
• The year from which index number is being prepared is called the base year which is always taken as 100.
• They are used in measuring the changes in magnitudes which cannot be measured directly.

in price, cost of living, wages, production, stock market, etc. Therefore, they are called “economic barometer”.
The formula used for Price Index Number $=\frac{\text { Totalpriceofthecurrentyear }}{\text { Totalpriceofthebaseyear }} \times 100$

• They are considered as barometer of economic activity.
• Index number which is calculated from a single variable is called “univariate • index” and which is constructed from a group of variables is called a “composite index”.