Page 284 - F2 - MA Integrated Workbook STUDENT 2018-19

Chapter 12

6.4 Types of index numbers

 simple indices – measures the changes in either price or quantity of a single
item

– Price index = P 1 ÷ P 0 × 100

– Quantity index = Q 1 ÷ Q 0 × 100

– P 1 and Q 1 – price/quantity at time 1

– P 0 and Q 0 – price/quantity at time 0 (base year)

Test your understanding 10

The unit price of Brand X in May 20X0 and May 20X1 was as follows:

Year 20X0 20X1

Unit price of Brand X $1.40 $1.75

The price index for Brand X in May 20X1, with base May 20X0 = 100 is:

A 80

B 120

C 125

D 135

 chain based indices

– A chain base index number expresses each year’s value as a percentage
of the value for the previous year.

– This simply means that each index number is calculated using the
previous year as base.

– If the rate of change is increasing, then the index numbers will be rising; if
it is constant, the numbers will remain the same and if it is decreasing the
numbers will be falling.

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