Q.Name the important basic tests of index numbers.

The important basic tests of index numbers are the Unit Test, Time Reversal Test, Factor Reversal Test and Circular Test.

The tests, briefly:

• Unit Test — the formula should be independent of the units in which prices/quantities are quoted.
• Time Reversal Test — $P_{01}\times P_{10}=1$; the index should work consistently when time is reversed. …