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Index Numbers

Question

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Discuss the simple Aggregative, Price Index. What are its limitations?

Solution

Simple Aggregative Price Index:A simple Aggregative Price Index is defined as

Which is the sum of prices of commodities in the current period ‘I’ expressed as the sum of prices in the base year ‘0’.

Limitations:
1. It has limited applicability.

2. No weightage is given to the relative importance of items.

3. Index is influenced by the items with the large unit prices.

Some More Questions From Index Numbers Chapter

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.

The consumer price index for june, 2005 was 125. The food index was 120 and that of others items 135. What is the percentage of the total weight given to food?

If a salary of a person in the base year is Rs. 4000 per annum and the current year is Rs. 6000 by how much should his salary rise to maintain the same standard of living if the CPI in Rs. 4000.

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