Question
What are the consideration underlying the choice of base period in construction of an index number?
Solution
Basic consideration underlying the choice of base period:
1. The base period should be a normal period. Abnormal periods like period of war or floods etc. should not be selected as a base year.
2. The base period should be neither too short nor too long.
3. It should not be the period for which actual data are not available.
4. It should not be too far back in the past.
