Tag: introduction to index number

Questions Related to introduction to index number

Indices calculated by the chain base method are free from:

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

  1. Seasonal variations

  2. Errors

  3. Percentages

  4. Ratios

Show answer
Correct Option: A
Explanation:

Indices calculated by chain base method are free from seasonal variations.

The chain base indices are not suitable for:

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

  1. Long range comparisons

  2. Short range comparisons

  3. Percentages

  4. Ratios

Show answer
Correct Option: A
Explanation:

$\Rightarrow$  The chain base indices are not suitable for : $Long\,range\,comparisons.$

$\Rightarrow$  In chain base method method, there is no fixed base period.
$\Rightarrow$  The chief advantage of this method is that the price relatives of a year can be compared with the price levels of the immediately preceding year. Businesses mostly interested in comparing this time period rather than comparing rates related to the distant past will utilize this method.

$\Rightarrow$  Another advantage of the chain base method is that it is possible to include new items in an index number or to delete old times which are no longer important. But the chain base method has the drawback that comparisons cannot be made over a long period.

In chain base method, the base period is:

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

  1. Fixed

  2. Not fixed

  3. Constant

  4. Zero

Show answer
Correct Option: B
Explanation:

$\Rightarrow$  In chain base method, the base period is : $Not\,fixed.$

$\Rightarrow$  In this method, there is no fixed base period; the year immediately preceding the one for which the price index has to be calculated is assumed as the base year. 
$\Rightarrow$  Thus, for the year 1994 the base year would be 1993, for 1993 it would be 1992, for 1992 it would be 1991, and so on. In this way there is no fixed base and it keeps on changing.
$\Rightarrow$  advantage of the chain base method is that it is possible to include new items in an index number or to delete old times which are no longer important. 

Two hundred items were sold at a snack stand for a total of $Rs$. $130.00$. The only items sold were cansof pop for $Rs$. $0.50$ and bags of popcorn for $Rs$. $0.75$. How many of each item were sold?

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

  1. $120$ cans of pop, $80$ bags of popcorn

  2. $80$ cans of pop, $120$ bags of popcorn

  3. $160$ cans of pop, $40$ bags of popcorn

  4. $40$ cans of pop, $160$ bags of popcorn

Show answer
Correct Option: B
Explanation:

  Let us assume no of cans of pop sold =x
no of bags of pop sold=200-x
So, as per question,
$0.50*x+0.75(200-x)=130$
$0.50x+150-0.75x=130$
$0.25x=20$
$x=80$
So, no of bags of pop sold=200-x=200-80=120
Answer (B) 80 cans of pop, 120 bags of popcorn

For consumer price index, price quotations are collected from:

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

  1. Fair price shops

  2. Government depots

  3. Retailers

  4. Whole-sale dealers

Show answer
Correct Option: C
Explanation:

$\Rightarrow$  For consumer price index, price quatations are collected from: $Retailers.$

$\Rightarrow$   A retailer is a company that buys products from a manufacturer or wholesaler and sells them to end users or customers. In a sense, a retailer is an intermediary or middleman that customers use to get products from the manufacturers.
$\Rightarrow$  Retailers are experts in marketing, sales, merchandise inventory, and knowing their customers. They purchase the goods from the manufacturers at cost and market them to consumers at retail prices. 
$\Rightarrow$  The retail price can be anywhere from 10 percent to 50 percent higher than the manufacturer cost. 

When the prices of rice are to be compared, we compute: 

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

  1. Volume index

  2. Value index

  3. Price index

  4. Aggregative index

Show answer
Correct Option: C
Explanation:

$\Rightarrow$  When the prices of rice are to be compared, we compute: $Price\,Index.$

$\Rightarrow$  Price index, measure of relative price changes, consisting of a series of numbers arranged so that a comparison between the values for any two periods or places will show the average change in prices between periods or the average difference in prices between places. 
$\Rightarrow$  In most countries price indexes are used to measure inflation, each focusing on the prices of a collection of goods and services important to a particular segment of the economy.

Price relatives computed by chain base method are called: 

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

  1. Price relatives

  2. Chain indices

  3. Link relatives

  4. None of them

Show answer
Correct Option: C
Explanation:

$\Rightarrow$  Price relatives computed by chain base method are called $Link\,\,relatives.$

$\Rightarrow$  Under this method, the base year’s price does not remain fixed but moves step from year to year. In other words, the immediately preceding year’s price becomes the base year’s price for each of the succeeding years.
$\Rightarrow$  Under this method, the base year’s price does not remain fixed but moves step from year to year. In other words, the immediately preceding year’s price becomes the base year’s price for each of the succeeding years.

$\Rightarrow$  $Chain\, index$ = $\dfrac{Average\, link\, relative\, of\, current\, year \times Chain\, index\, of\, previous\, year}{100}$

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.

Show answer
Correct Option: D
Explanation:

Clustering index is an example of non dense index.