Describe the uses of index number. What consideration are taken into account while selecting the base year for the preparation of an index number. long answer ha
Answers
Index numbers are used to measure changes in the value of money. A study of the rise or fall in the value of money is essential for determining the direction of production and employment to facilitate future payments and to know changes in the real income of different groups of people at different places and times.Selection should represent the real tastes, habits, and customs of the people. The selection must be easily recognizable. The selection should be tangible. The economic and social importance of various items should be considered.
Answer:
Explanation:
Professor Chandler defines it thus: “An index number of prices is a figure showing the height of average prices at one time relative to their height at some other time that is taken at the base period.” To understand the meaning of the term index number, three points are to be noted.