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Index Numbers

Question

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What are the limitations of Index Numbers?

Solution

In the construction of Index Numbers, there are some practical difficulties and theoretical limitations.

1. Index numbers are not fully true. They simply indicate arithmetical tendency of the temporal change in the variable.

2. Index numbers do not help in international comparison.

3. Index numbers are prepared with certain specific objectives.

4. It is difficult to collect retail prices so index numbers based on wholesale prices may be misleading.

Some More Questions From Index Numbers Chapter

consumer price index measures changes in:

The wholesale price index.

D.A. paid to the workers is based on:

Why do we need an index number?

Why is it essential to have different CPIs for different categories of consumers?

What does a consumer price index for industrial workers measure?

What is the difference between a price index and a quantity index?

Is the change in any price reflected in price index number?

Can the CPI for urban non-manual employees represent the changes in the cost of living of the President of India?

Try to list the important items of consumption in your family.

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