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Business Statistics > Index Numbers > Flashcards

Index Numbers Flashcards

1
Q

Definition of an index number

A

An index number is a specialised average designed to measure the relative change in the values of a variable or group of related variables with reference to change in time or location

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2
Q

What are the steps involved in the construction of an index number

A 
Purpose and scope of index number
Selection of items
Collection of data
Selection of this period
Selection of an average
Selection of appropriate weight
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3
Q

What are the types of index numbers

A

Simple index

Composite index

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4
Q

What is simple index

A

If an index is based on a single variable only then it is known as simple index

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5
Q

What is composite index

A

An index number based on more than one variable is called a composite index

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6
Q

Examples of simple index numbers

A

Index number of average quality of wheat rice
Index number of carpets exported to the middle east
Index number of ghee prices

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7
Q

Examples of composite index numbers

A

Index number of Pakistan’s exports

Index number of industrial production

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8
Q

Simple index numbers methods

A

Fixed base method

Chain base method

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9
Q

Composite index numbers types

A

Unweighted index numbers and weighted index numbers

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10
Q

Weighted index numbers

A

Weighted aggregative

Weighted average of relatives

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11
Q

Weighted aggregative

A

Laspeyre’s method
Paasche’s method
Fisher’s method

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12
Q

Weighted average of relatives

A

When weights are given
Laspeyre’s method
Paasche’s method

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13
Q

UnWeighted index numbers

A

Simple aggregative method

Simple average of relative’s method

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14
Q

Simple aggregative method

A

Fixed base method

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15
Q

Simple average of relatives method

A

Fixed base method

Chain base method

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16
Q

How do we obtain a simple index number

A

Simple index number is also known as simple relative and is obtained by dividing the current year price or quantity or value by the base year price or quantity or value and expressing the result in percentage

17
Q

Formula for finding price relative

A

Pi/Po x 💯
PI is price of current year
PO is the price of base year

18
Q

How do we find the link relative

A

Link relative can be found by dividing current period price or quantity or value with the price, quantity or a value of immediate previous year and expressing the ratio in percentage

19
Q

Formula for finding link relative

A

Price of current year/Price of previous year x 💯

20
Q

How do we find chain indices

A

Previous year chain indice multiplied by current year link relative divided by hundred

21
Q

What is the difference between fixed base method and chain base method

A

In fixed base method, the year or period of years to which all the prices are related is constant for all times. While in chain base method, the prices of a year are divided by the immediate previous year.

22
Q

How can we select the base period

A

The period with which we like to compare the relative changes is known as reference period or base period. The index for base period is always taken as 💯 .
The base period should be normal
Should not be too distant
Fixed base or chain base

23
Q

Which mean is considered to be the best average

A

Geo metric mean

24
Q

Simple aggregate method fixed base method formula

A

Under the price index the total of current year prices are divided by base year prices and expressed in percentage
€Pn/€Po x 💯

25
Q

Simple average of relatives method fixed base method formula

A

1) price relative of each item

2) average by mean or median

26
Q

Simple average of relative chain base method

A

1) link relative
2) average of link relative
3) chain indices of average

27
Q

What is weighted index number

A

The index number computed considering relative importance of every item involved in the index number is called weighted index number

28
Q

What is unweighted index number

A

Index number computed considering equal importance of every item involved in the index number is called unweighted index number

29
Q

Laspeyre’s method

A

Base year quantity is used as weight for price index and base year price is used as weight for quantity index

30
Q

Laspeyre formula

A

€PnQo/€PoQo x 💯

31
Q

Paasche’s method

A

Current year price is used as weights for quantity index and current year quantities are used as weights for price index

32
Q

Paasche’s formula

A

€PnQn/€PoQn x 💯

33
Q

Fisher’s method

A

Geometric mean of Laspeyre’s and Paasche’s indices

34
Q

Fisher’s formula

A

Square root of Laspeyre and Paasche

35
Q

Weighted average of relatives when weights are given method formula

A

Ip=Pn/Po x 💯

€IpW/€W

36
Q

Laspeyres method weighted average of relatives method

A

€(Pn/Po)(PoQo)/€PoQo x 💯

37
Q

Paasches method weighted average of relatives method formula

A

€(Pn/Po)(PoQn)/€(PoQn) x 💯

38
Q

What is
SPI
CPI
WPI

A

Sensitive price indicator
Consumer price index
Wholesale price index

Business Statistics (4 decks)

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