Index Numbers

An Index Number is a statistical measure expressing the relative change in a variable (commonly prices, but also quantities or wages) between a base period and a current period, with the base period conventionally assigned a value of 100.

Simple Aggregate Method — sum the current-year prices of all commodities and the base-year prices of all commodities, then take the ratio:

where $P_1$ = current year price, $P_0$ = base year price.

Simple Average of Price Relatives Method — first compute a price relative for each commodity individually, $\dfrac{P_1}{P_0} \times 100$, then average these relatives across all n commodities:

$P_{01} = \frac{\sum \left(\dfrac{P_1}{P_0} \times 100\right)}{n}$ …