Tag: index numbers

Questions Related to index numbers

Another name of consumer's price index number is:

business mathematics and statistics introduction to index number introduction to index numbers index numbers applied statistics

  1. Whole-sale price index number

  2. Cost of living index

  3. Sensitive

  4. Composite

Show answer
Correct Option: B
Explanation:

$\Rightarrow$  Another name of consumer's price index number is ; $Cost\,of\,living\,index.$

$\Rightarrow$  A cost-of-living index is a theoretical price index that measures relative cost of living over time or regions. 
$\Rightarrow$  It is an index that measures differences in the price of goods and services, and allows for substitutions with other items as prices vary.
$\Rightarrow$  Cost of living indexes are meant to compare the expenses an average person can expect to incur to acquire food, shelter, transportation, energy, clothing, education, healthcare, child care and entertainment in different regions.

Consumer price index are obtained by:

business mathematics and statistics introduction to index number introduction to index numbers index numbers applied statistics

  1. Paasche's formula

  2. Fisher's ideal formula

  3. Marshall Edgeworth formula

  4. Family budget method formula

Show answer
Correct Option: D
Explanation:

$\Rightarrow$  Consumer price index are obtained by: $Family\,\,budget\,\,method\,\,formula.$

$\Rightarrow$  In this method, the family budgets of a large number of people are carefully studied and the aggregate expenditure of the average family for various items is estimated. 
$\Rightarrow$  These values are used as weights. The current year’s prices are converted into price relatives on the basis of the base year’s prices, and these price relatives are multiplied by the respective values of the commodities in the base year. The total of these products is divided by the sum of the weights and the resulting figure is the required index numbers.
$P _{0n}=\dfrac{\sum WI}{\sum W}$   Here, $I=\dfrac{P _n}{P _0}\times 100$  and $W=P _0q _0$

Example of non dense index is

business mathematics and statistics introduction to index number introduction to index numbers index numbers applied statistics

  1. ternary index.

  2. secondary index.

  3. primary index.

  4. clustering index.

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Correct Option: D
Explanation:

Clustering index is an example of non dense index.

Index which has an entry for some of key value is classified as:

business mathematics and statistics introduction to index number introduction to index numbers index numbers applied statistics

  1. linear index.

  2. dense index.

  3. non dense index.

  4. cluster index.

Show answer
Correct Option: C
Explanation:

Index which has an entry for some of key value is classified as non dense index.

In multilevel indexes, primary index created for its first level is classified as

business mathematics and statistics introduction to index number introduction to index numbers index numbers applied statistics

  1. zero level of multilevel index.

  2. third level of multilevel index.

  3. second level of multilevel index.

  4. first level of multilevel index.

Show answer
Correct Option: C
Explanation:

In multilevel indexes, primary index is created for its first level  is classified as second level of multilevel index.

Construct the index number for 1991 taking 1990 as the base year from the following data by simple average of price relative method.

Commodity A B C D E
Price in 1990 100 80 160 220 40
Price in1991 140 120 180 240 40
business mathematics and statistics introduction to index number introduction to index numbers index numbers applied statistics

  1. 122.32

  2. 130.14

  3. 114.56

  4. 124.53

Show answer
Correct Option: A
Explanation:
 $Commodity$ $Price\,in\,1991$$P _0$  $Price\,in\,1991$$P _1$  $Price\,relative$$\dfrac{P _1}{P _0}\times 100$ 
 $A$ $100$  $140$  $140$ 
$B$  $80$  $120$  $150$
$C$  $160$  $180$  $112.5$
$D$  $220$  $240$  $109.09$
$E$  $40$  $40$  $100$ 
 $Total$     $611.59$

$\therefore$   By using simple average of price relative method,

$\Rightarrow$   $P _{01}=\dfrac{\sum P _{01}}{N}=\dfrac{611.59}{5}=122.32$

The current price of a soap is Rs 11.  The base price is 3, find price relative.

business mathematics and statistics introduction to index number introduction to index numbers index numbers applied statistics

  1. $2.7$

  2. $2.5$

  3. $3.6$

  4. None of the above

Show answer
Correct Option: C
Explanation:

$\Rightarrow$   Current price of soap is $Rs.11.$

$\Rightarrow$   Base price of soap is $Rs.3$
$\Rightarrow$   $Price\, relative$ = $\dfrac{Current\,price}{Base\,price}=\dfrac{11}{3}=3.6$

A composite price index based on the prices of a group of items is known as the

    business mathematics and statistics introduction to index number introduction to index numbers index numbers applied statistics

    1. Laspeyres Index

    2. Paasche Index

    3. Aggregate price index

    4. Consumer Price Index

    Show answer
    Correct Option: C
    Explanation:

    A composite price index based on the prices of a group of items is known as the Aggregate price index.

    Which of the following statement is incorrect?

    business mathematics and statistics introduction to index number introduction to index numbers index numbers applied statistics

    1. index number is a relative measurement

    2. in fact all index numbers are weighted

    3. theoretically the best average in construction of index numbers is Geometric mean

    4. it is not possible to shift the base if it is the case of fixed base index

    Show answer
    Correct Option: D
    Explanation:

    Most index numbers are subjected to revision from time to time due to different reasons. In most cases it becomes compulsory to change the base year because numerous changes took place with the passage of time. For example change may happen due to disappearance of old items, inclusion of new ones, change in weights of commodities or changes in conditions, habits and standard of life etc.

    In fixed base method, the base period should be: 

    business mathematics and statistics introduction to index number introduction to index numbers index numbers applied statistics

    1. For away

    2. Abnormal

    3. Unreliable

    4. Normal

    Show answer
    Correct Option: D
    Explanation:

    $\Rightarrow$  In fixed base method, the base period should be : $Normal$.

    $\Rightarrow$ The year which is selected as a base should be a normal year, or in other words, the price level in this year should neither be abnormally low nor abnormally high. If an abnormal year is chosen as the base, the price relatives of the current year calculated on its basis would give misleading conclusions. 
    $\Rightarrow$  For example, a year in which war was at its peak, say the year 1965, is chosen as a base year; thus the comparison of the price level of the subsequent years to the price of 1965 is bound to give misleading conclusions as the price level in 1965 was abnormally high.
    $\Rightarrow$  In order to remove the difficulty associated with the selection of a normal year, the average price of a few years is sometimes taken as the base price. The fixed base method is used by the government in the calculation of national index numbers.