Business Studies, asked by khojaidreeskhoja, 8 months ago

explain signifacnce of index number

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Answered by druthi65
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An index number is a method of evaluating variations in a variable or group of variables in regards to the geographical location, time, and other features. The base value of the index number is usually 100 and indicates either to price, date, a level of production, etc.

There are various kinds of index numbers, however, in present, the most relatable is price index numbers, that particularly indicates the changes in overall price level (or in the value of money) for a particular time. Here, the value of money is not constant, even if it falls or rises it will affect and change the price level. An increase in the price level determines a decline in the value of money and a decline in the price level means an increase in the value of money. Therefore, the differences in the value of money are indicated by the differences in the overall price level for a particular time. Therefore, changes in the overall prices can be evaluated by a statistical device known as ‘index number.’

Types of Index Number

Price Index Number: It evaluates the relative differences in costs between two particular points in time.

Quantity Index Number: It measures differences in the physical quantity of products manufactured, bought or sold of one item or group of items.

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