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Statistical techniques

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)

 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.

 multi-item (or weighted) indices

– A weighted index measures the change in overall price or overall quantity
of a number of different items compared to the base year.

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