Business Statistics Tutorial Mahmudul Hasan Nakib Founder President (Inventive Point) BBA , MBA (Finance), AUB, SEU CMA, ICMAB(Studying)

1. Index Number
Business Statistics Tutorial
Mahmudul Hasan Nakib
Founder President (Inventive Point)
BBA , MBA (Finance), AUB, SEU
CMA, ICMAB(Studying)

2. Index Number
 An index number is a statistical measure designed to show
changes in variables or group of related variables with
respect to time , geographical location or other
characteristics.
 When the index number of any product is 130 for the period
January 2017 compared to January 2016. It means that there
is a net increase in the prices of wholesale commodities to
the extent of 30 percent.

3. Methods of Constructing Index Number
 A large number of formula have been devised for
constructing Index Number. They can be grouped under
two heads;
 1) Un weighted Index Number.
 2) Weighted Index Number.

4. Un weighted Index Number.
 This method is used to construct a price index.
The formula is given by
Where, ∑ P₁ = Total current year prices of various
commodities.
∑ P₀ = Total base year prices of various
commodities.

5. Weighted Index Number.
 There are several methods to determine index number for
weighted index number of them six are well known.
 1) Laspeyres method.
 2) Paasche’s method.
 3) Dorbish and Bowley’s method.
 4) Fishers Ideal method.
 5) Marshall Edge work method.
 6) Kelly’s method.

6. Laspeyres method
 This method is named after its inventor Laspeyres. The
formula is given by
 Where , P₁ = Price of current year of any commodities.
P₀ = Price of base year of any commodities.
q₀ = Quantity of current year of any commodities.
q₀ = Quantity of base year of any commodities.

7. Paasche method
 This is also named after its inventor paasche’s.
The formula is given by

8. Fisher’s Ideal method
 By using Laspeyre’s and Paasche method scientist Fisher
invented more effective formula.
The formula is given by

9. Example
 The price and quantity of four commodities for the year 2016 and 2017 are given
below.
Construct index number using Laspeyres, Paaschi and Fisher’s Ideal nethod.
Name of the
commodities
Price (in taka) Quantity
2016 2017 2016 2017
Pen 7 9 250 200
Paper 16 30 150 170
Tooth brash 8 12 860 1000
Pencil 10 20 100 50

10. Solution