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Question
Define family budget method
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Solution
In this method, the weights are calculated by multiplying prices and quantity of the base year.
i.e. V = `sum"p"_0"q"_0`.
The formula is given by,
Cost of Living Index Number = `(sum"pv")/(sum"v")`
Where P = `"p"_1/"p"_0 xx 100` is the price relative.
V = `sum"p"_0"q"_0` is the value relative.
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______ : Base year prices :: P1 : Current year prices.
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.
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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.
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| Commodity | 2002 | 2012 | ||
| Price | Quantity | Price | Quantity | |
| A | 10 | 20 | 16 | 10 |
| B | 12 | 34 | 18 | 42 |
| C | 15 | 30 | 20 | 26 |
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Cost of living at two different cities can be compared with the help of
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Most commonly used index number is:
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Which of the following Index number satisfy the time reversal test?
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)xx100` |
| 3) Quantity Index | c) `(sump_1q_1)/(sump_0q_1)xx100` |
| 4) Paasche's Index | d) `(sump_1)/(sump_0)xx100` |
