Question

Explain the features of Index Numbers. ?

Answer 1

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 = \(\cfrac{Total\, Price\, of\, the\, Current\, year}{Total\, Price\, of\, the\, base\, year} \times 100\)

•  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”.