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Question
Find the Quantity Index Number using the Simple Aggregate Method in the following example.
| Commodity | I | II | III | IV | V |
| Base Year Quantities | 140 | 120 | 100 | 200 | 225 |
| Current Year Quantities | 100 | 80 | 70 | 150 | 185 |
Solution
| Commodity | Base Year Quantities q0 | Current Year Quantities q1 |
| I | 140 | 100 |
| II | 120 | 80 |
| III | 100 | 70 |
| IV | 200 | 150 |
| V | 225 | 185 |
| Total | 785 | 585 |
From the table, ∑ q0 = 785, ∑ q1 = 585
Price Index Number (Q01) = `(sum "q"_1)/(sum "q"_0) xx 100`
`= 585/785 xx 100`
= 74.52
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Find the odd word
Steps involved in the construction of index number -
Assertion (A): Generally, arithmetic mean is used in the construction of index numbers.
Reasoning (R): Arithmetic mean is simple to compute compared to other averages.
State with reason whether you agree or disagree with the following statement:
Any year can be selected as the base year
State with reasons whether you agree or disagree with the following statement:
It is not essential to decide the purpose of an index number while constructing it.
Explain the steps in constructing a price index number.
