Question

what are the problems arising in constructing index number

Answer 1

Sampling errors - - Index numbers are never cent percent accurate. Since selected items are included in the construction of index number, the sampling error creeps in. It is general seen that two different samples are drawn from the same universe donot produce identical results..

Normal year - - The base year with which prices of all other years are to be compared is assumed to be a normal year. But it is very difficult to select any year to be a normal year. Moreover the selection of different years as base years would produce different results.

Various methods-- There are many methods to find the index number.. In other words there is no single formula which will stand true all situations. Therefore, it become practically difficult to pin-point which formula will suit in a particular situation

Answer 2

Answer:

Thank you for your question. let me help in finding the true answer.

 

There are many difficulties of arising in constructing index numbers. They are given below.

Problem of selecting base period.

problem of collecting prices.

Problem of selecting the things or commodities.

Problem of selecting the method of average.

problem arising from changing overtime.

Problem of weight assigning.

Also, difficulty of comparison internationally.

Difficulty of comparing different places.

I hope this will help you