SKP Maths

STUDENT INFO:
PRINCIPLE DR.SUDHAKARRAO JADHAWAR ARTS,COMMERCE AND

SCIENCE SENIOR COLLEGE.
NAME: KUMAR RAJU PATIL
CLASS: F.Y.B.COM
DIV: ‘C’
SUB: BUSINESS MATHEMATICS & STATISTICS-II
MEDIUM: ENGLISH
TOPIC NAME: INDEX NUMBERS
GUIDED BY: REKHA KAVEDIYA MAM.
INDEX:
1. Introduction
2. Definition
3. Notation of index numbers
4. Types of index numbers
5. Cost of living index numbers
6. Uses of cost of living index number
7. Commonly used index numbers in India
INTRODUCTION:
Index number is a tool used to measure the changes in prices of commodities, industrial
and mineral production, sales, imports, exports etc. It was first developed by an Italian
economist Mr Carli, in 1764, for comparison of prices of commodities. Index numbers
serves the purpose of economic indicators. The field in which index numbers are used
are economics, trade, stock market, government organisations, etc. the popularly used
index numbers are
(i) Bombay stock exchange (BSE) SENSEX index number.
(ii) National stock exchange (NSE) index numbers.
(iii) All India wholesale price index number.
(iv) Consumer price index numbers.
DEFINATION:
Index number is a number designated to measure the average change in
the values of a group of related variables over two different situation.
The group of variable may be prices of specified commodities, quantities
of industrial production, volume of imports, exports etc. two different
situation may be two different times or places.
NOTATION OF INDEX
NUMBERS:
1. Purpose of index numbers: The purpose for which the index number is constructed should
be clearly and unambiguously mentioned. Similarly, the scope of index number should also
be defined clearly.
2. Selection of commodities: Selection of commodities is an important factor in the
construction of index index numbers. There are no rigid rules regarding selection of
commodities. Number of commodities should not be too large or too small.
3. Collection of data: Data may be price quotation or quantity consumed or quantity
produced or quantity imported etc. depending upon the purpose of index numbers. The data
collected should be accurate and proper representative.
4. Selection of type of average: It is stated above that the index number is a average change
in the prices or quantities. In order to combine the data.
5. Selection of weight: weighted average is more appropriate than simple average. Weight is
a device of giving due or proper importance to the commodity.
(i)Quantity weights (q): amount of commodities consumed.
(ii) Value weights (v) : it is a product of price and quantity used or produced.
TYPES OF INDEX
NUMBERS:
1.Price index number: Price index numbers are computed to measure the
relative changes in prices of group of commodities or a single commodity.
Government of India regularly computes two series (i)wholesale price index
number (ii) consumer price index number.
2. Quantity index number: Quantity index numbers are constructed to measure
the changes in volume of industrial production, agricultural
production, import, export etc.
3.Construction of index numbers: Base year is denoted by 0 and current year
by 1, price and quantities are denoted by p and q respectively. Hence, value v=
p.q. weights are represented by w. price index number, quantity index number
and value index number are denoted by P,Q and V respectively.
COST OF LIVING INDEX NUMBERS:
DEFINATION:
A cost of living index numbers or consumers price index number is a number which measures the average change
in the retail prices paid by a particular class of people at a particular class of people at a particular place a basket.
(a) Main steps in the construction of cost of living index numbers:
1. scope: scope of cost of living index number should be clearly defined. In other words, group of people and
geographical area for which index number is to be constructed should be defined in the beginning.
2. Family budget enquiry: a family budget enquiry is aimed to collect the information regarding commodities and
services, those are used in group under consideration which is referred as basket.
3. Collection of data: in this regard, retail prices are to be collected. Collection of retail prices is somewhat
tedious task. Retail prices vary from place to place and shop to shop, even in same shop, customer to
customer.
4. Selection of weights: there are two methods –
(I) weights proportional to the quantities weights viz.
(ii) weights proportional to the expenditure incurred.
(b) Methods of construction of cost of living index
number:
1. Aggregate expenditure method: This formula uses the quantities of
various commodities consumed in base period as weights. With
these weights, total expenditures on commodities for base period
and current periods are calculated. Hence,
cost of living index number = P0 – price of commodity in base period.
p1– price of commodity in current period.
p0 – Quantity consumed in base period.
2. family budget method: This method uses expenditure in base period as

weights. Hence,
this is method is also referred as weighted average of price relatives. By
means of family
budget enquiry, commodity wise total expenditure is determined.
Hence, current period price of commodity
I= --------------------------------------------------
Base period price of commodity.
USES OF COST OF LIVING
INDEX NUMBERS:
1. Mainly cost of living index numbers are used to determined the possible changes
required to be done in dearness allowances of employees from various fields. Cost of
living index number directly gives how much additional money is required to
maintain the same standards due to raise in prices.
2. Cost of living index numbers are useful in farming the policies regarding wages,
inflation etc.
3. These indies are useful in obtaining real income, finding purchasing power of money.
Purchasing power decrease as cost of living index number increases.
COMMONLY USED INDEX
NUMBER IN INDIA:
1. Index number of industrial production in India (IIP): The index number of industrial
production (IIP) serves the purpose of measure of industrial growth in country. It is
published by central statistical organisation (CSO) for all India as a monthly series, yearly
series.
2. All India wholesale price index numbers: the wholesale price index number (WPI) is the
most widely used index in business, industry and government. The office of economic
advisor to Govt.
3. Consumer price index numbers (CPI): consumer price index (CPI) numbers are intended to
measure the movements in retail prices of essential commodities for different sections of
the consumers.
4. Index number of agricultural production: index number of agricultural production for
Maharashtra is calculated with triannual average base 1979-82. it is weighted index number
based five main groups I. cereals ii. pulses iii. Oil seeds iv. Fibers and v. miscellaneous.
THANK YOU…..

SKP Maths

Uploaded by

Copyright:

Available Formats

SKP Maths

Uploaded by

Document Information

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

SKP Maths

Uploaded by

Copyright:

Available Formats

STUDENT INFO:

PRINCIPLE DR.SUDHAKARRAO JADHAWAR ARTS,COMMERCE AND

2. family budget method: This method uses expenditure in base period as

You might also like