This time series analysis is utilised for the determination trends and cyclical developments. Index number can be leveraged in case of future development of activities in the economic sphere. It helps in case of trends such as drawing outcomes for irregular forces and cyclical forces. Such findings help with the establishment of researches as well. Index numbers find extensive usage in economics and help in the framing of appropriate policies. It facilitates the transformation from nominal wage to real wage. It adjusts primary data at varying costs, which is useful for deflating. It gives a pointer for international comparison concerning different economic variables-for instance, living standards between two countries. This price stability inherent to fiscal and economic policies is based on index numbers. Government policies are framed following the index number of prices. With the determination of price levels, wage rates may be revised. Wage rate regulation is consistent with the changes in the price level.
It helps in measuring changes in the standard of living as well as the price level. The Consumer Price Index (CPI) and Wholesale Price Index (WPI) are major examples of a price index. It will indicate the relative value and not the absolute value. Index of Industrial Production (IIP) is an example of Quantity Index.Ī price index number is used to measure how price alters across a period.
It shows the relative change across a period for particular quantities of goods. The value index is utilised in for inventories, sales and foreign trade, among others.Ī quantity index number is used to measure changes in the volume or quantity of goods that are produced, consumed and sold within a stipulated period. The index that is used to ascertain the changes in price can also be used for industrial and agricultural production.Ī value index number is formed from the ratio of the aggregate value for a particular period with that of the aggregate value that is found in the base period. It is representative of a special case of averages especially for a weighted average It helps in the comparison of the levels of a phenomenon concerning a specific date and to that of a previous date The method of index number measure alters from one variable to another related variable It gives a general idea of the relative changes Index number only shows the tentative changes in factors that may not be directly measured. It is a special category of average for measuring relative changes in such instances where absolute measurement cannot be undertaken It helps to study such changes' effects due to factors that cannot be directly measured. Index numbers occupy an important place due to its efficacy in measuring the extent of economic changes across a stipulated period. An index number is expressed in percentage form. It will show general relative change and not a directly measurable figure. Index number in statistics is the measurement of change in a variable or variables across a determined period.
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