Statistics: Index Numbers

Topics in this chapter

• Index Number Concepts and Uses
• Simple Index Number Construction
• Weighted Price and Quantity Indices
• Consumer Price and Cost-of-Living Indices
• Fixed-Base and Chain-Base Methods
• Index Number Tests
• Index Number Interpretation and Applications

Cheat sheet

Practice questions

1. Question 1Q-845CEF

   A price index number is 125 when the base-year index is 100. This means that, on average, the prices in the current year are:

   1. A.25% lower than in the base year
   2. B.25% higher than in the base year
   3. C.125% higher than in the base year
   4. D.Equal to the prices in the base year
   See the answer and solution
2. Question 2Q-551AEB

   The prices of commodities A and B were ₹10 and ₹20 respectively in the base year, and ₹15 and ₹30 respectively in the current year. What is the simple aggregative price index for the current year?

   1. A.125
   2. B.140
   3. C.150
   4. D.160
   See the answer and solution
3. Question 3Q-0C38C0

   Why should the base year selected for constructing an index number be a normal year? State one additional desirable feature of a base year.

   See the answer and solution
4. Question 4Q-0DE0ED

   The price relatives of three commodities are 120, 90 and 150. If all three commodities are given equal importance, what is the simple average of price relatives?

   1. A.100
   2. B.110
   3. C.120
   4. D.130
   See the answer and solution
5. Question 5Q-4FB191

   A consumer price index is calculated using the family budget method. The price relatives of food, clothing and housing are 150, 120 and 100 respectively, while their weights are 40, 35 and 25. What is the consumer price index?

   1. A.117
   2. B.122
   3. C.127
   4. D.135
   See the answer and solution