Question

What what are the characteristics of index numbers? Explain.​

Answer 1

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  So what can be  index numbers? Well, technically speaking, an index number is a statistical measure designed to show the changes in a variable or group of related variables with respect to time, geographic location or maybe other characteristics.

We can understand this with an example. Suppose the price of a certain product doubles relative to a year. As a result of this, the index of price would rise. So an index number can be with respect to a variable such as a price and demonstrates the change in that variable in present relative to a base year.

Why to Use Index Numbers?

To calculate the change in production of various sectors, index numbers of production are used. This, in turn, helps the government to take necessary measures to increase production and growth. Export and import policies are formulated by referring to the index of imports and exports. Lastly, the government plans its fiscal and monetary policies to increase growth, employment, productivity etc. with the aid of index numbers. By and large, an index number is an important statistical tool.

Answer 2

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An index number is the measure of change in a variable (or group of variables) over time. It is typically used in economics to measure trends in a wide variety of areas including: stock market prices, cost of living, industrial or agricultural production, and imports.