Q.State any two uses of index numbers in business and economic analysis.

Index numbers are used well beyond just tracking prices — they feed directly into real economic decisions like wage-setting and policy.

Index numbers have several distinct, genuinely useful applications:

1. Measuring the general price level and inflation — a wholesale or consumer price index tracks whether prices, on average, are rising (inflation) or falling (deflation) across the economy, which a single commodity's price cannot show on its own.

2. Adjusting wages, dearness allowance and pensions — many employment contracts and government pay scales link periodic increases directly to a cost-of-living index, so that real (inflation-adjusted) income does not erode as prices rise.

3. Deflating other economic series — dividing a value series (such as national income measured at current prices) by a suitable price index converts it into real terms, allowing fair comparison across years.

4. Guiding government and business policy — a rising price index can prompt anti-inflationary monetary policy, while a rising index of industrial production signals economic expansion, guiding investment and production decisions.

Any two of the above are a complete, correct answer.

Naming only 'to measure price change' without connecting it to a real decision the index feeds into (wage adjustment, policy, deflation) — a complete answer should state what the index is actually used for, not just what it measures.