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Question
What is the difference between a price index and a quantity index?
Distinguish Between
Solution
| Price Index | Quantity Index |
1. Price Index Number is calculated by two methods, namely.
|
1. Quantity Index Number is calculated by two methods, namely
|
| 2. Price Index number is also known as Unweighted Index Number. | 2. Quantity Index Number is also known as Weighted Index Number. |
| 3. Price Index Number takes into account the prices of the commodity of the base year as well as of the current year. | 3. Quantity Index takes into consideration the weights of goods assigned according to the quantity. |
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Inflation and Index Numbers
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The monthly expenditure (Rs.) of a family on some important items and the Goods and Services Tax (GST) rates applicable to these items is as follows:
| Item | Monthly Expense (Rs) | GST Rate % |
| Cereals | 1500 | 0 |
| Eggs | 250 | 0 |
| Fish, Meat | 250 | 0 |
| Medicines | 50 | 5 |
| Biogas | 50 | 5 |
| Transport | 100 | 5 |
| Butter | 50 | 12 |
| Babool | 10 | 12 |
| Tomato Ketchup | 40 | 12 |
| Biscuits | 75 | 18 |
| Cakes, Pastries | 25 | 18 |
| Branded Garments | 100 | 18 |
| Vacuum Cleaner, Car | 1000 | 28 |
Calculate the average tax rate as far as this family is concerned.
