Chapter 15：15章.pptx

Contents ? Definition ? Classification ? Methods of construction ? Unweighted Indices ? Weighted Indices ? Tests of adequacy of indices formulae ? Value Index number ? Consumer Price Index number 1 Definition ? An index number measures the relative change in price, quantity, value, or some other item of interest from one time period to another. ? A simple index number measures the relative change in one or more than one variable. ? According to Blair “ Index numbers are a specialized type of averages. ” 2 ? The McGraw-panies, Inc. 2008 McGraw-Hill/Irwin - Bowley “ Index numbers are used to measure the changes in some quantity which we cannot observe directly ”. 3 Classification of index numbers ? Price index numbers : It measures the changes in the prices of modities produced, consumed or sold in a given period with reference to the base period. ? Quantity index numbers : These help to measure pare the changes in the physical volume of goods produced, sold and purchased in a given pared to some other given period. ? Value index numbers : These indexes show changes in the value of modity in a given period in reference to the base period .4 Classification (contd.) ? Consumer price index : These indexes measure the average over time in the prices paid by the consumers for a specific group of goods and services. ? Special purpose index numbers: These indexes are framed for a special study relating to a particular variable or aspect. 5 Methods of construction of index numbers 6 Unweighted Indices 7 8 Simple average - example 8 9 Simple Aggregate Index – Example 9 10 Weighted Indices ? When modities are not of equal importance. We assign weight to modity relative to its importance and index puted from these weights is called weighted index numbers. ? Laspeyre ’ s Index Number : In this index number the base year quantities are used as weights, so it also called base year weighted index. 10