Q.State the main difference between fixed base method and chain base method.

Fixed base: all years compared to one fixed base year. Chain base: each year compared to the previous year (base changes every year).

Fixed base method: One particular year is chosen as the base and kept unchanged. The index number of every other year is computed by comparing that year's prices with this single fixed base year. It is simple and the index numbers of different years are directly comparable.

Chain base method: There is no single permanent base. Each year's prices are compared with the prices of the immediately preceding year to get link relatives, and these are chained together. The base thus shifts from year to year, which suits situations where the list of items changes over time.

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