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What is the importance of an index number? Taking an example examine the process of calculating an index number and show the changes. - Geography

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What is the importance of an index number? Taking an example examine the process of calculating an index number and show the changes.

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उत्तर

Index numbers are statistical devices designed to measure the relative change in the level of variable or group of variables with respect to time, geographical location, etc. In other words, these are the numbers that express the value of a variable at any given period called ‘current period’ as a percentage of the value of that variable at some standard period called “base period’.

Index numbers are indispensable tools of economics and business analysis. Following are the main uses of index numbers. Index numbers are used as economic barometers. Index numbers help in formulating suitable economic policies and planning. They are used in studying trends and tendencies. Businessmen need to know the trends in the market to make decisions about wage rates, prices of the product, prices of raw materials, etc. Therefore, index numbers are very useful for them. They provide information regarding foreign trade. They are useful in forecasting future economic activity. The cost of living index numbers determines .whether the real wages are rising or falling or remain constant. It is used in deflating. For example, suppose rice sells at ?9/kg at BBSR in 2005 as compare to ₹ 4.50/Kg in 1985.
Therefore the index number of price of rice in 2005 compared to 1985 is calculated as
`{₹ 9.00}/{₹ 4.50} × 100= 200`
This means that there is a net increase of 100% in the price of rice in 2005 as compared to 1985. [The base year’s index number is always treated as 100]
Suppose, during the same period 2005 the rice sells at Rs. 12.00/kg in Delhi. Therefore, the index number of the price at Bhubaneswar compared to the price at Delhi is

`{₹ 9.00}/{₹ 12.00} × 100= 75`
This means that there is a net decrease of 25% in the price of rice in 2005 as compared to 1985.
The above index numbers are called ‘Price Index Numbers’.
To take another example the production of rice in 2012 in Orissa was 42,000 metric tons in comparison to 36,000 metric tons in 2001. So the Index Number of the quantity produced in 2012 compared to 2001 is
`42000/36000 × 100= 116.66`
That means that there is a net increase of 21.61% in production of rice in 2012 as compared to 2001

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Data Compilation and Presentation
  क्या इस प्रश्न या उत्तर में कोई त्रुटि है?
अध्याय 1: Data – Its Source and Compilation - Exercise [पृष्ठ १२]

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एनसीईआरटी Practical Work in Geography [English] Class 12
अध्याय 1 Data – Its Source and Compilation
Exercise | Q 3. (ii) | पृष्ठ १२
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