What is the importance of an index number? Taking an example examine the process of calculating an index number and show the changes.

Solution

An index number is a statistical measure designed to show changes in variable or a group of related variables with respect to time, geographic location or other characteristics. It is to be noted that index numbers not only measure changes over a period of time but also compare economic conditions of different locations-industries, cities or countries. Index number is widly used in economics and business to see changes in price and quantity. There are various methods for the calculations of index number. Simple aggregate method is most commonly used. It is obtained using the following formula:

Σq₁ = Total of the current year production.

Σq₀ = Total of the base year production.

Example: Production of iron ore in India.

Year	Production (in million tonnes)	Calculation	Index Number
1970-71	32.5		100
1980-81	42.2		130
1990-91	53.7		165
2000-01	67.4		207

Some More Questions From Data : Its Source And Compilation Chapter

Enumerate five sources of secondary data.

Discuss the national and international agencies where from secondary data may be collected.