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Index Numbers — Economics STD 11 Commerce — Question

CBSE BoardEnglish MediumSTD 11 CommerceEconomicsIndex Numbers6 Marks
Question
What do you understand by absolute change, relative change and net change?
✓

Answer

Absolute Change: is the actual difference between the prices of a good/service in current year as compared to base year. For example, the price of sugar in 2010 was ₹ 15 per kg and in 2016 is ₹ 42 per kg. So, absolute change in price is ₹ 27 per kg (42-15). Relative Change: is the percentage increase or decrease between the price of a good/service in current year as compared to base year. In case of the example discussed above, the relative change in the price of sugar will be 180%, which is computed with the help of given formula,$\text{Relative change}=\frac{\text{Change in Price}}{\text{Price in BaseYear}}\times100$
$=\frac{27}{15}\times100=180\%$
Net Change: is the average of the percentage change in the prices of goods or services in the current year as compared to a base year. For example, price of sugar increases by 180% and price of oil increases by 40%. So, on a whole, the net change in prices is 110% $\bigg[\frac{180+40}{2}\bigg].$

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