Question

Answer the following questions in about 125 words:
(ii) What is the importance of an index number? Taking an example examine
the process of calculating an index number and show the changes.

Answer 1

Answer:

Index numbers are important in economic statistics. In simple terms, an index (or index number) is a number displaying the level of a variable relative to its level (set equal to 100) in a given base period. Index numbers are intended to study the change in the effects of such factors which cannot be measured directly.

Explanation:

Methods :

(a) Simple index number and

(b) Weighted index number.

Answer 2

An index number is the measure of change in a variable (or group of variables) over time.

Importance :

• Index number is mainly used in the field of economics and statistics.

• It is also used in mlwide variety of areas including: stock market prices, cost of living, industrial or agricultural production, and imports.

By two methods you can compute the index numbers:

(a) Simple index number

(b) Weighted index number.

Hope your doubts are clear ❤️