Index Number in Statistics Notes Class 12
INDEX NUMBER is a key statistical tool that expresses the relative change in price, quantity, or value compared to a base period. By measuring these changes, index numbers help us understand fluctuations in prices paid for raw materials, the number of employees and customers, annual income, and profits, among other factors.
Understanding Simple and Composite Index Numbers
When we use an index number to measure the relative change in just one variable, like hourly wages in manufacturing, it is called a simple index. On the other hand, when index numbers measure changes in a group of variables—such as prices of a specific list of commodities, the volume of production across different industry sectors, or agricultural crop production—it is referred to as a composite index.
How Index Numbers Work
Index numbers help us track the average change in a group of related variables over two different time periods. For instance, they can show us the price trends of a specified list of commodities or the overall cost of living. However, it’s important to remember that index numbers do not imply uniform changes for all commodities or groups involved. For example, in the case of a Price Index, while some item prices may rise, others might fall. The Price Index only shows the average change across the group of related commodities.
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