Page 65 - VIRANSH COACHING CLASSES

where, Σq = sum total of the quantities of the
SIMPLE INDEX 1
NUMBER current year
CONSTRUCTION OF
INDEX NUMBERS WEIGHTED Σq = sum total of the quantities of the base year
INDEX NUMBER 0
Ex 2 : Construct a Quantity index number using
A) Simple Index Number : In this method, the simple method from the given data :
every commodity is given equal importance. Steps : 1) Add the quantities of the different
It is the easiest method of constructing index commodities of the base year to derive Σq
numbers. This method can be applied to 0
determine 2) Add the quantities of the different commodities
1) Price Index Number of the current year to derive Σq
1
2) Quantity Index Number 3) Apply the formula : Σq
3) Value Index Number Quantity Index Number Q = 1 × 100
01 Σq 0
Some Solved Examples :
Commodities Qty. in 2000 Qty. in 2001
1) Price index number : It is measured as: (Base year) q (Current year) q
Σp 0 1
Price Index Number P = 1 × 100 A 30 45
01 Σp
0
where, Σp = sum total of the prices of the current year B 55 70
1
Σp = sum total of the prices of the base year C 90 105
0
Ex 1 : Construct a Price index number using the D 35 60
simple method from the given data : Total Σq = 210 Σq = 280
0
1
Steps : 1) Add the prices of the different Quantity Index Number Q = Σq 1 × 100
commodities of the base year to derive Σp 01 Σq 0
0 280
2) Add the prices of the different commodities of Q = 210 × 100 = 133.33
01
the current year to derive Σp
1 Q =133.33
3) Apply the formula : 01
Σp
Price Index Number P = 1 × 100 3) Value Index Number : It is measured as :
01 Σp
0 Σp q
1 1
Commodities Prices in 2010 Prices in 2015 Value Index Number V = Σp q × 100
01
(in `) Base (in `) (Current 0 0
year) p year) p where, Σp q = sum total of the product of the
1 1
0 1 prices and quantities of the current year.
A 20 30
B 60 80 Σp q = sum total of the product of the prices and
0 0
C 100 130 quantities of the base year.
D 40 60 Ex 3 : Construct a Value index number using the
Total Σp = 220 Σp = 300
0 1 simple method from the given data :
Σp
Price Index Number P = 1 × 100 Steps : 1) Find the product of prices and their
01 Σp
300 0 respective quantities of the different commodities
P = × 100 = 136.36
01 220 for the base year to derive p q . Take the sum
0 0
P =136.36 total of the products to derive Σp q .
01 0 0
2) Quantity index number : It is measured as : 2) Find the product of prices and their respective
Σq quantities of the different commodities for the
Quantity Index Number Q = 1 × 100
01 Σq
0
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