Question
Explain the features of index numbers.
✓
Answer
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.
- 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”.
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