Tag: introduction to index number

Questions Related to introduction to index number

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.

    If all the values are not of equal importance the index number is called:

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

    1. Simple

    2. Unweighted

    3. Weighted

    4. None

    Show answer
    Correct Option: C
    Explanation:

    If all the values are not of equal importance, the index number is called Weighted.

    A weighted aggregate price index where the weight for each item is its base period quantity is known as the

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

    1. Paasche Index

    2. Consumer Price Index

    3. Producer Price Index

    4. Laspeyres Index

    Show answer
    Correct Option: D
    Explanation:

    A weighted aggregate price index where the weight for each item is its base period quantity is known as the Laspeyres Index.

    Index for base period is always taken as: 

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

    1. One

    2. Zero

    3. Hundred

    4. None of these

    Show answer
    Correct Option: C
    Explanation:

    Index for base period is always taken as Hundred.