Read the given passage and answer the questions:
| Index Number is a technique of measuring changes in a variable or group of related variables with reference to time, geographical location and other characteristics. Index Number is very useful for economists, farmers, traders, government, educationalists and trade union leaders for planning and implementing the plans according to their sector. The scope of index number is not limited to only one subject but it extends to many subjects such as Economics, Educational science, Psychology, History, Sociology, Geography etc. While framing index number its objective must be determined. To attain the objective the information is collected in various ways and this information is used for comparing two different time periods. For this purpose, the base year’s index is assumed as 100 and accordingly the value of the current year is calculated. Laspeyre, Paasche and Fisher have suggested different methods for constructing index numbers. |
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| Explain the meaning of Index Number. |
| To whom the Index Number is useful? |
| Express your opinion about the given passage. |
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Start your 14-day free trial to unlock the full solution →An index number is a statistical device that measures relative changes in a variable (or group of variables) over time or place, with the base period taken as 100. As the passage states, it is useful to economists, farmers, traders, the government, educationalists and trade-union leaders. The passage correctly highlights its wide scope and objective-based construction.
Meaning of Index Number: As the passage explains, an index number is a technique of measuring changes in a variable, or a group of related variables, with reference to time, geographical location and other characteristics. To measure such change, the base year's value is taken as 100 and the current year's value is expressed relative to it, so that the extent of change (rise or fall) can be easily read as a percentage-type figure.
To whom is the index number useful: According to the passage, index numbers are useful to a wide range of people and bodies — economists, farmers, traders, the government, educationalists and trade-union leaders — because each of them can use these figures for planning and implementing plans in their own sector. Its scope is not limited to economics alone but extends to educational science, psychology, history, sociology and geography as well.
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