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Question
Explain the types of index numbers.
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Solution
An index number is a device to measure changes in economic variables (or groups of variables) over a period of time. The types of index numbers are as follows:
- Price Index Number: It measures the general changes in prices of goods. It compares the level of prices between two different time periods.
- Quantity Index Number: It measures changes in the level of output or physical volume of production in the economy. E.g.: changes in agricultural and industrial production, etc., over time. It is also called the volume index number.
- Value Index Number: The value of a commodity is the product of its price and quantity (p × q). Value index number measures changes in the value of a variable in terms of rupees. It is a more informative index because it combines changes in price and quantity.
- Special Purpose Index Number: They are constructed for a specific purpose. E.g.: import-export index numbers, labour productivity index numbers, share price index numbers, etc.
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RELATED QUESTIONS
Complete the Correlation:
Price Index : Inflation :: ______ : Agricultural production
Choose the correct alternative :
Price Index Number by Simple Aggregate Method is given by
Choose the correct alternative :
Quantity Index Number by Simple Aggregate Method is given by
Quantity Index Number by Weighted Aggregate Method is given by ______.
Choose the correct alternative :
Value Index Number by Weighted Aggregate Method is given by
Fill in the blank :
Price Index Number by Simple Aggregate Method is given by _______.
Fill in the blank :
Quantity Index Number by Simple Aggregate Method is given by _______.
Fill in the blank :
Value Index Number by Simple Aggregate Method is given by _______.
Fill in the blank :
Price Index Number by Weighted Aggregate Method is given by _______.
Fill in the blank :
Quantity Index Number by Weighted Aggregate Method is given by _______.
Fill in the blank :
Value Index Number by Weighted Aggregate Method is given by _______.
State whether the following is True or False :
`(sum"p"_1)/(sum"p"_0) xx 100` is the price Index Number by Simple Aggregate Method.
`sum ("p"_0"q"_0)/("p"_1"q"_1) xx 100` is Value Index Number by Simple Aggregate Method.
Solve the following problem :
Find the Price Index Number using Simple Aggregate Method. Consider 1980 as base year.
| Commodity | Price in 1980 (in ₹) | Price in 1985 (in ₹) |
| I | 22 | 46 |
| II | 38 | 36 |
| III | 20 | 28 |
| IV | 18 | 44 |
| V | 12 | 16 |
Solve the following problem :
Find the Quantity Index Number using Simple Aggregate Method.
| Commodity | Base year quantity | Current year quantity |
| A | 100 | 130 |
| B | 170 | 200 |
| C | 210 | 250 |
| D | 90 | 110 |
| E | 50 | 150 |
Price Index Number by Weighted Aggregate Method is given by ______
State whether the following statement is True or False:
The three types of Index numbers are
i. Price Index Number
ii. Quantity Index Number
iii. Value Index Number
State whether the following statement is True or False:
`sum("q"_1)/("q"_0) xx 100` is the Quantity Index Number by Simple Aggregate Method
State whether the following statement is True or False:
`sum ("P"_1"q"_1)/("p"_0"q"_0) xx 100` is the Value Index Number by Simple Aggregate Method
Find Quantity Index Number using Simple Aggregate method
| Commodity | A | B | C | D | E |
| Base year Quantity | 170 | 150 | 100 | 195 | 205 |
| Current year Quantity | 90 | 70 | 75 | 150 | 95 |
Calculate Quantity Index Number using Simple Aggregate method
| Commodity | I | II | III | IV | V |
| Base year Quantity | 140 | 120 | 100 | 200 | 225 |
| Current year Quantity | 100 | 80 | 70 | 150 | 185 |
Find values x and y if the Price Index Number by Simple Aggregate Method by taking 2001 as base year is 120, given `sum"p"_1` = 300.
| Commodity | A | B | C | D |
| Price (in ₹) in 2001 | 90 | x | 90 | 30 |
| Price (in ₹) in 2004 | 95 | 60 | y | 35 |
Find x from following data if the Value Index Number is 200.
| Commodity | Base Year | Current Year | ||
| Prive | Quantity | Price | Quantity | |
| A | 10 | 10 | 20 | 10 |
| B | 8 | 20 | 22 | 15 |
| C | 2 | x | 8 | 10 |
| D | 9 | 10 | 16 | 10 |
| E | 5 | 6 | 3 | 10 |
Choose the correct pair :
| Group A | Group B |
| 1) Price Index | a) `(sum p_1q_1)/(sum p_0q_0) xx 100` |
| 2) Value Index | b) `(sum q_1)/(sum q_0) xx 100` |
| 3) Quantity Index | c) `(sum p_1q_1)/(sum p_0 q_1) xx 100` |
| 4) Paasche's Index | d) `(sum p_1)/(sum p_0) xx 100` |
Calculate the price index number for the given data.
| Commodity | A | B |
| Price in 2020 (₹) | 20 | 30 |
| Price in 2021 (₹) | 40 | 40 |
State with reason whether you agree or disagree with the following statement:
The quantity index number is one type of index number.
Give an economic term:
An index number measuring the general changes in the prices of goods over a period of time.
Explain the meaning of the Price Index Number.
Identify and explain the concept from the given illustration:
Pooja collected information regarding a change in the quantity of imports of India from 2019 to 2020 and prepared an index number.
Choose the correct pair :
| Group A | Group B | ||
| 1) | Price Index | a) |
`(sump1q1)/(sump0q0)xx100` |
| 2) | Value Index | b) | `(sumq1)/(sumq0)xx100` |
| 3) | Quantity Index | c) | `(sump1q1)/(sump0q1)xx100` |
| 4) | Paasche's Index | d) | `(sump1)/(sump0)xx100` |
State with reasons whether you agree or disagree with the following statement.
There are many types of index numbers.
Observe the following table and answer the questions given below it:
| Commodities | Prices in 2006 (in ₹) (Base Year) P0 | Prices in 2006 (in ₹) (Current Year) P1 |
| A | 20 | 30 |
| B | 30 | 45 |
| C | 40 | 60 |
| D | 50 | 75 |
| E | 60 | 90 |
Questions:
- Write the formula for calculation of price index.
- Find the value of ∑P0 and ∑P1.
- Find the price index P01.
Choose the correct pair :
| Group A | Group B | ||
| 1) | Price Index | a) | `(sump_1q_1)/(sump_0q_0) xx 100` |
| 2) | Value Index | b) | `(sumq_1)/(sumq_0) xx 100` |
| 3) | Quantity Index | c) | `(sump_1q_1)/(sump_0q_1) xx 100` |
| 4) | Paasche's Index | d) | `(sump_1)/(sump_0) xx 100` |
Choose the correct pair:
| Group A | Group B | ||
| 1) | Price Index | a) | `(sum"p"_1"q"_1)/(sum"p"_0"q"_0)xx100` |
| 2) | Value Index | b) | `(sum"q"_1)/(sumq"_0)xx100` |
| 3) | Quantity Index | c) | `(sum"p"_1"q"_1)/(sum"p"_0"q"_1)xx100` |
| 4) | Paasche's Index | d) | `(sum"p"_1)/(sum"p"_0")xx100` |
