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Question
State with reason whether you agree or disagree with the following statement:
Index numbers can be constructed without the base year.
Options
Agree
Disagree
Solution
I disagree with the above statement.
Reason:
- Index numbers calculate changes in an economic variable from the previous year to the current year. In the past, this year was referred to as the base year.
- The base year for the index number calculation is the typical year from the past. The base year ought to be typical, meaning that there ought to be no natural disasters, hostilities, crises, etc. In the same way, it shouldn't have happened too long ago.
- The suffix "o" indicates it when creating index numbers with respect to the base year. For a given variable, the index of the base year is taken to be 100. The previous year's index numbers are used to calculate the current year's figures.
Thus, index numbers cannot be constructed without the base year.
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Statements that are incorrect in relation to index numbers.
- An index number is a geographical tool.
- Index numbers measure changes in air pressure.
- Index numbers measure relative changes in an economic variable.
- Index numbers are specialized averages.
______ : Base year prices :: P1 : Current year prices
Complete the Correlation:
__________ : Single variable :: Composite index : Group of variables
State with reason whether you agree or disagree with the following statement:
Index numbers measure changes in the price level only.
Explain the features of index numbers.
Features of index numbers:
- It is useful in framing suitable economic policies.
- It is useful to present financial data in real terms
- Index numbers are statistical devices.
- Index numbers are specialized averages.
Device that measures changes in an economic variable or a group of variables over a period of time –
Find the odd word
Types of index numbers -
Index number was originally developed to measure ______.
Assertion (A): Index numbers are statistical devices.
Reasoning (R): Index numbers measure only changes in the price level over a period of time.
Identify & explain the concept from the given illustration.
Bombay Stock Exchange has developed “Sensex” as a stock market index for reflecting the share prices of listed companies.
Identify & explain the concept from the given illustration.
Agricultural Research Institute constructed an index number to measure changes in the production of raw cotton in Maharashtra during the period 2015-2020.
Define Index Number
State the uses of Index Number
Write note on Fisher’s price index number
State the test of adequacy of index number
Explain factor reversal test
Define family budget method
Using Fisher’s Ideal Formula, compute price index number for 1999 with 1996 as base year, given the following:
| Year | Commodity: A | Commodity: B | Commodity: C | |||
| Price (Rs.) | Quantity (kg) | Price (Rs.) | Quantity (kg) | Price (Rs.) | Quantity (kg) | |
| 1996 | 5 | 10 | 8 | 6 | 6 | 3 |
| 1999 | 4 | 12 | 7 | 7 | 5 | 4 |
Calculate Fisher’s index number to the following data. Also show that it satisfies Time Reversal Test.
| Commodity | 2016 | 2017 | ||
| Price (Rs.) | Quantity (kg) | Price (Rs.) | Quantity (kg) | |
| Food | 40 | 12 | 65 | 14 |
| Fuel | 72 | 14 | 78 | 20 |
| Clothing | 36 | 10 | 36 | 15 |
| Wheat | 20 | 6 | 42 | 4 |
| Others | 46 | 8 | 52 | 6 |
Calculate the cost of living index by aggregate expenditure method:
| Commodity | Weight 2010 |
Price (Rs.) | |
| 2010 | 2015 | ||
| P | 80 | 22 | 25 |
| Q | 30 | 30 | 45 |
| R | 25 | 42 | 50 |
| S | 40 | 25 | 35 |
| T | 50 | 36 | 52 |
Choose the correct alternative:
Cost of living at two different cities can be compared with the help of
Choose the correct alternative:
Most commonly used index number is:
Choose the correct alternative:
Which of the following Index number satisfy the time reversal test?
Calculate the Laspeyre’s, Paasche’s and Fisher’s price index number for the following data. Interpret on the data.
| Commodities | Base Year | Current Year | ||
| Price | Quantity | Price | Quantity | |
| A | 170 | 562 | 72 | 632 |
| B | 192 | 535 | 70 | 756 |
| C | 195 | 639 | 95 | 926 |
| D | 1987 | 128 | 92 | 255 |
| E | 1985 | 542 | 92 | 632 |
| F | 150 | 217 | 180 | 314 |
| 7 | 12.6 | 12.7 | 12.5 | 12.8 |
| 8 | 12.4 | 12.3 | 12.6 | 12.5 |
| 9 | 12.6 | 12.5 | 12.3 | 12.6 |
| 10 | 12.1 | 12.7 | 12.5 | 12.8 |
Using the following data, construct Fisher’s Ideal Index Number and Show that it satisfies Factor Reversal Test and Time Reversal Test?
| Commodities | Price | Quantity | ||
| Base Year | Current Year | Base Year | Current Year | |
| Wheat | 6 | 10 | 50 | 56 |
| Ghee | 2 | 2 | 100 | 120 |
| Firewood | 4 | 6 | 60 | 60 |
| Sugar | 10 | 12 | 30 | 24 |
| Cloth | 8 | 12 | 40 | 36 |
Compute the consumer price index for 2015 on the basis of 2014 from the following data.
| Commodities | Quantities | Prices in 2015 | Prices in 2016 |
| A | 6 | 5.75 | 6.00 |
| B | 6 | 5.00 | 8.00 |
| C | 1 | 6.00 | 9.00 |
| D | 6 | 8.00 | 10.00 |
| E | 4 | 2.00 | 1.50 |
| F | 1 | 20.00 | 15.00 |
An Enquiry was made into the budgets of the middle class families in a city gave the following information.
| Expenditure | Food | Rent | Clothing | Fuel | Rice |
| Price(2010) | 150 | 50 | 100 | 20 | 60 |
| Price(2011) | 174 | 60 | 125 | 25 | 90 |
| Weights | 35 | 15 | 20 | 10 | 20 |
What changes in the cost of living have taken place in the middle class families of a city?
Assertion and reasoning question:
- Assertion (A): The index number considers all factors.
- Reasoning (R): The index number is based on samples.
Explain the meaning of index number.
State with reasons whether you agree or disagree with the following statement:
Index number measures changes in the price level only.
Read the given passage and answer the questions:
|
Index Number is a technique of measuring changes in a variable or group of related variables with reference to time, geographical location and other characteristics. Index Number is very useful for economists, farmers, traders, government, educationalists and trade union leaders for planning and implementing the plans according to their sector. The scope of index number is not limited to only one subject but it extends to many subjects such as Economics, Educational science, Psychology, History, Sociology, Geography etc. While framing index number its objective must be determined. To attain the objective the information is collected in various ways and this information is used for comparing two different time periods. For this purpose, the base year’s index is assumed as 100 and accordingly the value of the current year is calculated. Laspeyre, Paasche and Fisher have suggested different methods for constructing index numbers. |
- Explain the meaning of Index Number.
- To whom the Index Number is useful?
- Express your opinion about the given passage.
Choose the correct pair :
| Group A | Group B | ||
| 1) | Price Index | a) | `(sump_1q_1)/(sump_0q_0) xx100` |
| 2) | Value Index |
b) |
`(sumq_1)/(sumq_0) xx 100` |
| 3) | Quantity Index | c) | `(sump_1q_1)/(sump_0q_1) xx100` |
| 4) | Paasche's Index | d) | `(sump_1)/(sump_0) xx 100` |
The base year's index of a selected variable is assumed as ______.
Complete the correlation:
P0 : ______ : : P1 : Current year price.
