Index Numbers — Economics STD 12 Commerce / Arts — Question

Index numbers may be of following types.
(A) Price Index Number It may be further classified into:

• Retail Price Index Number
• Wholesale Price Index Number
• Cost of Living Index Number

(B) Quantity Index Number
(C) Special Purpose Index Number
(D) Value Index Number

(A) Price Index Number : A price index number measures the changes in the prices of an entire group of related commodities over a period of time. It may be of following three types.

(i) Retail Price Index Number : These are ; complied to measure the changes in the retail price of various commodities eg. index number of consumer prices, bonds, etc.

(ii) Wholesale Price Index Number : This measures price level of goods traded in the wholesale market. They indicate general changes in the purchasing power of money.

(iii) Cost of Living Index Number: It is special type of retail price index which shows the price variations in a group of commodities consumed by different classes of people over a period of time. This index number aims ‘ to measure the changes in cost of living of different classes of people over a period of time e.g. cost of living index number of middle class people, rich class people, etc.

(B) Quantity Index Number: It is the average of the quantity of commodities produced in different sectors of the economy. It helps us to know whether the level of production in the country is rising or falling as compared to the production in previous years. It is also called volume index number.

(C) Special Purpose Index Number : Special purpose index numbers are constructed to know the index of productivity of labour, exports and imports, shares on stock market, etc.

(D) Value Index Number : It measures the relative changes in the total value of items like retail sales, profit, etc. as compared to their level in the base year. It is obtained by multiplying the price of an item with its quantity (P x Q).