Distinguish between a Price Index Number, a Quantity Index Number and a Value Index Number, giving the formula

Worked Examples · Example 2

Q. Distinguish between a Price Index Number, a Quantity Index Number and a Value Index Number, giving the formula for each.

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✓ Free question

Price Index Number measures the average relative change in the PRICES of a group of commodities between a base and a current year (e.g., $L=\sum p_1q_0/\sum p_0q_0\times100$ ).
Quantity (Volume) Index Number measures the average relative change in the QUANTITIES produced/consumed/sold of a group of commodities — computed with the identical formula structure as a price index, but with $p$ and $q$ interchanged, e.g. $Q_{01}=(\sum q_1p_0/\sum q_0p_0)\times100$ .
Value Index Number measures the average relative change in the total VALUE (price × quantity together) of a group of commodities:

V_{01}=\frac{\sum p_1q_1}{\sum p_0q_0}\times100

A value index captures BOTH the price effect and the quantity effect at once, which is why it cannot, on its own, tell us whether a rise in total value was driven by higher prices, larger quantities, or both.

✓Final answer

V_{01}=(\sum p_1q_1/\sum p_0q_0)\times100

Same / Similar Concept — real previous-year questions on the same or a closely similar concept, not this exact question.

CBSE 2026Set ANNUAL1 mark
$Q. Find the odd word: Types of Index Numbers: Selection Index Number, Price Index number, Value Index Number, Quantity Index Number$
›Reveal solutionSolution
Odd word = Selection Index Number.

Index numbers are classified into these standard types:

Price index number — measures changes in the general price level.

Quantity index number — measures changes in the volume of goods produced or consumed.

Value index number — measures changes in total value (price multiplied by quantity).

Selection Index Number is not a recognised type of index number, so it is the odd word.

✓Final answer
$Odd word: Selection Index Number .$
CBSE 2026Set ANNUAL1 markMCQ
$Q. Statements that are incorrect in relation to index numbers - Index number is a geographical tool. Index numbers measure changes in the air pressure. Index numbers measure relative changes in economic variable. Index numbers are specialized averages.$
(a) c, d
(b) a, b
(c) b, c
(d) a, b, c, d
›Reveal solutionSolution
The incorrect statements about index numbers are (a) and (b), so the answer is a, b.

An index number is a statistical device that measures relative changes in an economic variable (such as prices or output) over time. Judging each statement:

(a) 'Index number is a geographical tool' — incorrect; it is a statistical tool, not a geographical one.

(b) 'Index numbers measure changes in the air pressure' — incorrect; air pressure is measured by a barometer, not an index number.

(c) 'Index numbers measure relative changes in an economic variable' — correct.

(d) 'Index numbers are specialised averages' — correct.

✓Final answer
$Incorrect statements: a, b .$
CBSE 2025Set ANNUAL1 markMCQ
$Q. The Price Index number is used ______.$
(a) to measure the general changes in the prices of goods.
(b) as a geographical tool.
(c) to measure the air pressure.
(d) in measurement of goods.
›Reveal solutionSolution

The correct answer is to measure the general changes in the prices of goods.

A price index number is a statistical measure that shows the average change in the prices of a group of goods and services between a base year and a current year, expressed as a percentage of the base. It captures the general movement of prices (rise or fall) rather than the price of a single item, and is widely used to study inflation and the cost of living. The other options (a geographical tool, measuring air pressure, measurement of goods) are unrelated to a price index.

✓Final answer
$A price index number is used to measure the general changes in the prices of goods .$
CBSE 2023Set ANNUAL1 markMCQ
$Q. Find the odd word out: Types of Simple Index Number:$
(a) Laspeyre’s Price Index Number
(b) Price Index Number
(c) Quantity Index Number
(d) Value Index Number
›Reveal solutionSolution
The odd word is Laspeyre's Price Index Number — it is a weighted index number, while price, quantity and value index numbers are the ordinary (simple) types.

Index numbers can be classified by method of construction (simple/unweighted vs weighted) and by content (price, quantity, value):

Price Index Number — measures change in price levels.

Quantity Index Number — measures change in physical volume of goods.

Value Index Number — measures change in total value (price × quantity).

These three are content-based classifications and can be built as simple index numbers. Laspeyre's Price Index Number, however, is a specific weighted method (it uses base-year quantities as weights), so it does not belong to the group of simple index-number types.

✓Final answer
$Among the types of simple index number, the odd word out is Laspeyre's Price Index Number .$
CBSE 2022Set ANNUAL1 markMCQ
$Q. Assertion and reasoning question: Assertion (A): The index number considers all factors. Reasoning (R): The index number is based on samples.$
(a) Assertion (A) is true but Reasoning (R) is false.
(b) Assertion (A) is false but Reasoning (R) is true.
(c) Both statements (A) and (R) are true and (R) is the correct explanation of (A).
(d) Both statements (A) and (R) are true and (R) is not the correct explanation of (A).
›Reveal solutionSolution

The correct option is Assertion (A) is false but Reasoning (R) is true.

An index number measures the relative change in a group of related variables (like prices) over time. It is constructed from a sample of representative items, not from every single commodity or factor in the economy — so reasoning (R) is true. Precisely because it rests on samples, an index number does not consider all factors; it gives only an approximate, representative picture. Therefore assertion (A) ('the index number considers all factors') is false. Hence A is false but R is true.

✓Final answer
$(A) is false but (R) is true$

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Q.Distinguish between a Price Index Number, a Quantity Index Number and a Value Index Number, giving the formula for each.

Concept understanding — Meaning, Features and Types of Index Numbers

Q.Distinguish between a Price Index Number, a Quantity Index Number and a Value Index Number, giving the formula for each.

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