Q.Write a short note on: Index numbers

Index numbers are statistical measures that express the relative change in a variable or group of variables over time, compared with a base period taken as 100. They are used to measure changes in prices, production and the cost of living.

Index numbers are studied in the Economic Statistics topic of the AP Intermediate 2nd-year Economics course (aligned with the NCERT/CBSE commerce curriculum).

Meaning. An index number is a statistical device used to measure the change in the level of a variable, or a group of related variables, over time or between places, with reference to a selected base period. The value of the variable in the base period is taken as 100, and the value in the current period is expressed as a percentage of it. If a price index for the current year is 125, for example, it means prices have risen by 25 per cent compared with the base year.

Types. The main types are price index numbers, which measure changes in prices (such as the Wholesale Price Index and the Consumer Price Index); quantity index numbers, which measure changes in the volume of production or goods; and value index numbers, which measure changes in total value.

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